It must be true. I saw it in the business section and the story was by-lined The Associated Press! The king of upscale coffee – Starbuck’s – has been losing market share hand over fist to the competition this winter. And the competition’s attack on the original up-scale coffee vendor isn’t letting up…
McDonald’s is leading the assault on Starbuck’s, in an effort to
dethrone the King of Premium Coffee…
Business analyst AdX says Starbuck’s lost a full percentage point of its market share in the Premium Coffee Niche in January alone. That’s huge! And in such a short time! They had 12 per cent at the end of last year. By February 1 this year, they had only 11 per cent. That’s a loss of about 8 per cent in sales.
What’s going on?
First and foremost, the competition has been hammering Starbuck’s with deep discounts on core beverages, both hot and cold. Starbuck’s has tried to counter with a barrage of limited-time novelty beverages and specials. But they haven’t stepped forward and matched deals like McDonald’s. McDonald’s plans to sell basic Drip Coffee for $1 and small Specialty Beverages for just $2 during the first quarter of this year as an opening salvo, McD’s U.S. Senior Vice President of Strategy and Insights Kristy Cunningham told Bloomberg Business News. Starbuck’s, for comparison, currently sells a Drip for (US)$2.10 and Specialty drinks for (US)$4.25. And that doesn’t take into account moves by other Coffee vendors to challenge Starbuck’s dominance.
At the present rate, Starbucks will lose almost 25 per cent of its business by the end of the first quarter of 2017. That’s a ‘Red Alert’ situation! And that’s just McDonald’s first salvo!
I warned them…
I’ve been warning both the Coffee and Burger food service segments that a major reckoning is coming. ‘Shakeout’ is the word I’ve been using, and that seems to be what’s happening in the Coffee sector. But the reason for this instability in that sector has its roots in another: The Burger Chain sector. McDonald’s, in its attempt to remain king of Burgerland, has branched out into other, neighbouring niches – like Coffee, Pastries and Big-Time, All-day Breakfast. That’s caused instability in those sectors and the ripples just keep spreading outward.
Now…
The harder the chains work to survive, the better it is for customers. Price wars are a fundamental weapon in these food fights. There will also bean explosion in novelty menu items. In fact, we’re seeing new ones launched by all the players in both niches almost weekly. But enjoy it while you’ve got it, Coffee and Burger lovers. In the end, I predict that some players will drop out of the game or be absorbed by others. To keep costs down and profits up, the survivors will streamline their menus, limiting your choice in the future. Remember: when dealing with giant corporations, profit comes first and customer welfare sits somewhere way down the list…
~ Maggie J.