McDonald's (MCD): A Coup De Grace For Starbucks

Crain’s Chicago Business has gotten its hands on the game plan for McDonald’s (MCD) to conquer the premium coffee world. As the business magazine put it: "In one of its biggest strategic moves ever, McDonald’s Corp. plans to sell lattes, cappuccinos and other specialty drinks in all of its 14,000 U.S. restaurants next year. McDonald’s predicts the new drinks will add more than $1 billion a year to sales,"

The "biggest ever" part may be a bit of hyperbole, but the core truth is that McDonald’s is preparing to match Starbucks (SBUX) product for product. And, the fast food chain is ready to spend considerable sums of money to put the necessary machinery into its stores to make it work.

Howard Shultz, the founder of Starbucks, recently told The New York Times that he could not understand why the market did not like his stock. His reasoning was that the market for premium coffee is much larger than Wall St. understands, and that there is still considerable growth left in the market.

Schultz is right. The problem is that it looks like most of that potential market will not be going to him.

Douglas A. McIntyre