Let's take this one more step. If you want a cup of coffee in under 15 minutes, do you go to Starbucks? Me neither. Let's be honest, getting coffee at a Starbucks is quite often a real pain in the ass ...
... This is what caused my jaw to drop: When asked about McDonald's premium coffee in other parts of the country, Donald said he "didn't know the details" - WHAT??!!?? Imagine the CEO of GM (GM) saying he was not aware of what Ford (F) was doing. Can you guess how fast WalMart's (WMT) CEO Lee Scott would be fired if in an interview he said he "did not know" what Target was doing? The very fact that McDonald's chose "Newman's Own" branded coffee gave them instant credibility for its quality, and is responsible for the immediate acceptance it has had. How can Donald not know this? If I was currently a shareholder of SBUX, this would make me very nervous and I would advise any new potential investor to avoid these shares now.
I think the key here is exactly what Todd said: "If you want a cup of coffee in under 15 minutes, do you go to Starbucks? Me neither. Let's be honest, getting coffee at a Starbucks is quite often a real pain in the ass."
Which leads to the question: why is Starbucks the giant they are? Sure, they have good coffee, but that's not the whole picture. It's the brand. It's a the barista experience. It's being surrounded by jazz music and modern art and people wearing turtleneck sweaters. THAT's what you pay for when you dish out 5 Bucks for a Grande Mocha Frap.
It always kind of puzzled me when people talked about the competition between Starbucks and Dunkin Donuts. Because in my mind, just because both companies offer coffee doesn't mean they're selling the same thing. McDonalds having halfway decent coffee isn't so much a threat to Starbucks, but rather for Dunkin Donuts. See... McDonalds isn't ritzy. It isn't posh and it's not cool. But it's cheap. McDonalds is fighting over Dunkin' Donuts market share - people who want a quick, cheap breakfast and a good cup of coffee to wake them up.
People always seem to forget the power of how a company looks in a consumer's eyes. Apple is the darling of Wall Street - but what exactly makes MacOS superior to Vista? The iPod to the Zune? It's not the product itself, but rather something much more intangible that makes consumers drool over Apple's products - branding. All companies have a brand, and the successful ones know how to manipulate it. Starbucks has nothing to worry about from McDonalds, because the branding of the two stores are completely antipodal.