Burger King And Starbucks: 1+1=1

Burger King (NYSE:BKS) will begin to sell Starbucks (NASDAQ:SBUX) Seattle’s Best Coffee at its US restaurants. That would seem to be an admission that the coffee that the fast food has served up until now was inadequate. Shame on Burger King for not doing its best for customers.

The move is a reaction to McDonald’s success with its McCafe coffees which are part of the breakfast menu that has done so much to improve that firm’s fortunes and its earnings.

The alliance between Burger King and Starbucks pairs McDonald’s two greatest enemies, each of which is doing poorly as it attempts to compete with the world’s largest fast food operation. The McCafe product is widely viewed as taking market share from Starbucks because of a price advantage and tests that show coffee drinkers prefer the McDonald’s brew. Burger King has been a weak No.2 in sales among fast food companies running well behind McDonald’s for years.

Burger King is betting that its customers and potential customers will be drawn by either the Starbucks brand name or the fact that Starbucks tastes better than Burger King’s previous coffee. Neither of those assumptions may be true. Starbucks usually finishes in the middle of most taste tests which compare several American brands. The Starbucks name may not be a magnet for people who like to buy and eat breakfast in their cars.

The move could also backfire on Starbucks. There is no guarantee that some customers who would go to a local Starbucks will not go to Burger King to get their coffee instead. Burger King has enough outlets so that the attrition Starbucks faces could undermine its sales more than the coffee chain has anticipated.

McDonald’s may be in first place among breakfast customers because it offers a more attractive menu or a greater number of breakfast choices. Coffee may have little to do with that. Maybe coffee is just coffee whether it comes from Starbucks or not.

Douglsa A. McIntyre