Sector Snap: Fast-food may best specialty coffee

Associated Press
A Stifel Nicolaus & Co. analyst said Friday fast-food and other quick-service operators will likely continue to take customers away from specialty coffee retailers as consumers search for more affordable options.

Analyst Steve West said in a note to investors that Peet's Coffee & Tea Inc., Dunkin' Donuts and McDonald's Corp. could be big winners in the "coffee wars" through 2009.

"Just as Starbucks is trying to turn around its U.S. business ... McDonald's is rolling out McCafe, arguably one its largest national initiatives in company history," he said.

McDonald's has now added new espresso-based drinks to more than half of its U.S. restaurants. The drinks are slightly cheaper than those at Starbucks Corp., which has struggled lately with slow U.S. same-store sales, or sales at stores open at least a year.

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