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McCafés challenge StarbucksIn 2009, Starbucks was in trouble. With 16000 outlets and operating in 49 countries, Starbucks was the world’s largest coffee chain. But economic recession was taking its toll, with 2009 sales 5% down on the previous year’s. And McDonald’s was pushing hard its cheap coffee, McCafés. The McCafés concept had emerged in Australia in the 1990s. McCafés operate within or next to the regular McDonald’s outlets. They use high quality coffee machines and sell different blends of coffee according to the tastes of local markets. The coffee is priced lower than Starbucks’ t traditional prices. By 2009, nearly half of Germany’s 1200 McDonald’s operated a McCafés. And McCafés were spreading rapidly across Europe/ The target was 1200 McCafés in Europe by the end of 2009, against Starbucks’ 1300. Starbucks announced a 500m Euro cost reduction programme, with investments in operational efficiencies and new technologies. Starbucks also entered the 17bn Dollars instant coffee market, launching its Starbucks Via Ready Brew coffee head-to-head against other brands. In particular, it began to transform the format of its stores. All Starbucks stores previously designed in the basis of a standard palette of colours and furniture, now in Seattle, the company opened a new store without any of the usual branding. Named 15th Ave, Coffee and Tea. The new store was based on close study of local independent coffee stores. Starbucks’ logo is completely absent, and wine and beer are available. Table tops come from a landscaper’s stone yard and the shop uses discarded theatre seats. Evenings offer live music and poetry readings. In the UK, Starbucks’s largest European market, the same thing is being applied. Facing competition from companies like Costa Coffee, McCafés and Wetherspoons. The UK’s Starbucks chain is abandoning the old identikit format. Local artacts, bolder colours, bigger community noticeboards and even second hand furniture will all be used to create more individual stores. Carrot sticks and porridge are joining the usual high-calorie cakes and paninis. Wilson explained: in every store, there will be something that is locally relevant, the thing that needs to be the same in every store is the latte, the cappuccino, the product and the culture of coffee tastings and the knowledge.1. Analyze the moves of Starbucks and McDonald’s on the axes of price and perceived quality.

 

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