Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Starbucks Corporation (SBUX), McDonald’s Corporation (MCD) – Coffee: America’s Favorite Addiction

Page 1 of 2

The average American consumes up to 300 mg of caffeine per day. While energy drink’s and soda’s comprise some of that consumption, coffee is still the go-to morning drink for many people.

Starbucks Corporation (NASDAQ:SBUX)

Nowhere is this more apparent than Starbucks Corporation (NASDAQ:SBUX). One look at an average location on a workday morning reveals just how addicted Americans are to coffee. Lines for Starbucks Starbucks Corporation (NASDAQ:SBUX) drive-thrus often stretch around the building, with consumers paying as much as $2 to feed that addiction.

Consumers pay more

On the heels of Starbucks Corporation (NASDAQ:SBUX)’ announcement that it would implement a slight pricing increase, the company revealed a 28% increase in earnings for its second quarter. Same-store sales were up 8%, while revenue was $3.7 billion, compared to $3.3 billion a year ago.

As Starbucks Corporation (NASDAQ:SBUX) makes plans to offer yogurt in its stores by next year, analysts are closely watching. For its next quarter, EPS is expected to be between $0.59 to $0.60, with full year EPS between $2.22 to $2.23. With revenue growth of as much as 13% next year, Starbucks Corporation (NASDAQ:SBUX) has high hopes its new initiatives.

A Cheaper option

Since 2001, McDonald’s Corporation (NYSE:MCD) has tried to grab the American coffee dollar, but the company began its McCafe line as a national standalone restaurant in Australia in the 90’s. The stores were a success, bringing in 15% more revenue than a McDonald’s Corporation (NYSE:MCD) location and eventually became the largest coffee shop in Australia and New Zealand.

In America, McCafe has been incorporated into regular McDonald’s Corporation (NYSE:MCD) locations, with the goal of being seen as a high-end brand of coffee. In 2011, the company credited McCafe with boosting sales 15% for the quarter, stating that its frozen drink line is particularly popular during the summer months.

The company’s $7.08 billion in revenue fell slightly short of analyst expectations in its most recent quarter, the decline blamed on weak earnings in Europe and Asia. The shortfall has one investor posing an interesting idea: split McCafe off as its own chain. Is it possible we’ll be passing a McCafe location on our own morning commutes?

It’s not a far-fetched idea. One of the company’s biggest struggles is competing with fast food giants like The Wendy’s Co (NASDAQ:WEN) and Burger King Holdings, Inc. (NYSE:BKC), while customers seek out healthier food choices from chains like Subway. Instead of adding more stores, the company could implant small McCafe locations in high-traffic business areas to lure some Starbucks customers.

Page 1 of 2
Loading Comments...