Over the last three months, shares in McDonald’s (MCD) are up almost 10%. Starbucks (SBUX) shares are off almost 10% over the same period. McDonald’s has been on a run with revenue and same-store sales soaring. Part of the reason is the success of its breakfast menu which includes premium coffees. Of course, most consumers are not going to get a cup and McDonald’s and then cross the street and get another at Starbucks. Not unless they are caffeine addicts.
But, Starbucks refuses to be outdone. It is pumping up the sale of its ground coffee at retail outlets. Deals with Pepsi (PEP) and Kraft (KFT) will improve the reach of Starbucks coffee in outlets in the US and abroad.
The ground coffee and pre-packaged drink business is still small for Starbucks, but it is very profitable. MSNBC puts operating income of $41.6 million, on revenue of $90.75 million, in the company’s most recent quarter.
Will selling coffee that consumers can make at home hurt Starbucks store traffic? No one know yet. But, at least McDonald’s is not selling pre-packaged burgers in supermarkets.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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