Filed under: Products and services, Competitive strategy, Starbucks (SBUX), McDonald’s (MCD)

McDonald’s Corp. (NYSE: MCD) and Starbucks Corp. (NASDAQ: SBUX) have been trying to cut into each other’s businesses for a while now, with McDonald’s introducing premium coffee and Starbucks its breakfast sandwiches. After test marketing cappuccinos and iced coffee in various markets, McDonald’s is ready to take its rivalry with Starbucks to the next level by rolling out a makeover of all its U.S. restaurants by 2009 to feature specialty beverages such as coffee drinks, smoothies, energy drinks, and other bottled beverages.

Specialty drinks have higher profit margins than sandwiches, and McDonald’s estimates this “Made for You” campaign could boost sales by as much as $1 billion a year. Results from test markets in which the plan has already been tried suggest that it doesn’t require additional staff and that it doesn’t slow down service, but counters and drive-thru areas do have to be remodeled to make room for new equipment. Some franchisees are concerned about the costs of such renovations.

This has to be better news for McDonald’s investors and watchers than Moody’s downgrade of McDonald’s last week due in part to competition and labor and energy costs. Shares fell 54 cents, or 1.1 percent, to $54.26 after the Moody’s announcement, but closed Friday at $54. 47. On the other hand, a Goldman Sachs analyst has McDonald’s as a top pick in the otherwise mixed restaurant sector, for its global strength. Starbucks was downgraded last week as well.

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This entry was posted on Sunday, September 30th, 2007 at 7:57 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.