We know the recession is hurting purchases of big-ticket items such as cars and flat-screen TVs, but even life's seemingly small luxuries, such as that morning latte, are being hit hard. Indeed, an
Advertising Age study found that 60% of Americans have scaled back from premium coffees in the past six months, with the mighty Starbucks experiencing a flattening of its froth. Enter Dunkin' Donuts and McDonald's, which both upped their coffee-marketing efforts in 2008, hoping to steal some of Starbucks' share.
According to Optimedia's Antony Young it's hard to discuss these two marketers' approaches to coffee without pondering Starbucks' year. The Seattle-based company has just about single-handedly democratized specialty coffees in the U.S. market since it went public in the early 1990s. Of late, however, the company has experienced Venti-size issues with investors, citing a loss of focus, overexpansion and the recession as contributing to its woes. Starbucks saw a 3% decline in same-store sales and a 53% profit drop in fiscal 2008. It also sought to close down unprofitable stores at the end of a transition year, in which former CEO Howard Schultz took back the reins of the company.
Starbucks, long admired by many for building its brand with only a passing interest in traditional advertising, faced a wave of activity last year from two very well-drilled media marketers in Dunkin' Donuts and McDonald's, which were looking to gain ground in this high-margin business.
Dunkin' Donuts is not new to coffee, having served cappuccinos and lattes since 2003. Despite its name, it earns 65% of its revenue from beverages. Its strong national media push in 2008 directly targeted Starbucks in a high-profile comparative ad campaign that included a blind taste test reminiscent of the Pepsi/Coke wars.
Not to be outdone, McDonald's aggressively promoted its own coffee as a value proposition; increased the availability of coffee facilities across its nationwide restaurant network; launched new products such as iced coffee and sweet tea; and rolled out a regional program to support openings of its branded McCafes.
Labels: Dunkin Donuts, McDonalds, Starbucks