The New Coffee Wars: Who will prevail?

I drink a grande decaf over ice with heavy cream every morning. Although I eliminated caffeine about three years ago, it’s still part of my morning ritual. I still feel off if I don’t get my fix.

Considering over 52% of Americans over age 18 drink coffee everyday, is it any wonder McDonald’s, Dunkin’ Donuts and a slew of others want a piece of Starbucks‘ action?

Dunkin’ Donuts’ has moved much of its marketing focus to coffee and has taken direct aim at Starbucks:

Over the last few years, McDonald’s increased its coffee ad spend, and even offers Newman’s Own Organic Coffee in some locations:

In Western Washington, McDonald’s is currently offering an online coupon good for one of their new espresso drinks at select McDonald’s locations. You can print the coupon at unsnobbycoffee.com.

The site is simple, but gives you the opportunity to interact with the brand. You can play Hotshot Pinball or do a snobby coffee intervention. Fill in the blanks, then sending it to a friend. Not a bad word of mouth tool.

Snobby coffee intervention. Fill in the form and send to a friend.

This competition couldn’t be coming at a tougher time for Starbucks. It’s stock is at $17.55 a share today (it’s down from $32 a year ago). Howard Schultz recently returned to the helm and has made a number of positive changes:

  • A return to the core business by eliminating a number of food products – “It smells like coffee again!” my barista told me yesterday
  • New “Pike Place Roast” coffee is fresh-ground and fresh-brewed every 30 minutes (I tried it yesterday – it’s honestly the best cup of coffee I’ve ever had at an SBUX)
  • New espresso machines that are lower so the baristas can see the customer
  • Free refills when you use your Starbuck’s card
  • The Starbucks refresh also included a new customer forum called My Starbucks Idea. It’s not a social networking site, but as a tool for creating conversation with customers, it’s quite good. In Starbucks adopts IdeaStorm concept, Shel Holtz did a nice job comparing it to Dell’s Ideastorm.

    Who will prevail?

    Dunkin’ Donuts is obviously known for their dunkers and their drip coffee. They may take some of Starbucks customers – especially those that care less about coffee or the coffee experience than they do convenience.

    McDonald’s has immense distribution, so they’ll always be a threat. McDonald’s employees will probably never be trained baristas. But if their coffee tastes good enough, some will buy it there instead of walking across the parking lot to a “real coffee shop.”

    My bet is on Starbucks. At a time when customers are seeking authenticity, they are returning to the recipe that helped them succeed. Their focus on service as well as improving and increasing the dialog they are having with their customers is the responsible thing to do, and I believe they will be rewarded for it.

    So, where do you grab your coffee, and why?