MarketTrip - Coffee Wars: Caffeine Clash or Java Joke?

Is this for real or is the notion of a brewing premium coffee brouhaha brought on by the Golden Arches about as credible as Iraq's WMD?

Disclaimer: I'm not a coffee snob. For me, it's not who's logo is on the cup but rather who can be counted on to deliver a credible cup of regular joe day in day out. And I'm willing to pay a premium if need be because a lousy cup of coffee is no cup of coffee at all!

McDonald's is now featuring a "premium roast coffee" which McD's executives assert will help the fast food chain recapture coffee drinkers "lost" to coffee-focused competitors like Starbucks and Dunkin' Donuts and other smaller regional players. The assertion goes that customers, having the option of getting a quality cupa joe at one of the chain's thousands of conveniently located domestic outlets and at a lower price than their current cup, will come in (or "back" by McD's rationale) by the sack full. But is this a credible claim and does D&D and Starbucks have anything to fear for real?

To answer this, we must consider not the coffee provider's strategy NOR the quality (e.g., taste) but how the need a coffee fulfills and the value the drinker associates with the fulfillment of that need influences where they choose to buy their coffee. Need and value are arguably the two most influential motivations for any purchase decision for reasons that should be obvious so I won't elaborate here.

Without over thinking this (as is the tendency for marketers and analysts alike), we need to climb into people's caffeinated heads!

What's at issue here is simply the question of the significance of cost and convenience factors as they apply to and influence people's coffee purchase behavior.

In essence, we are vetting the notion that a cup of coffee (suspending disbelief for few minutes about differences in taste) is a commodity like...say gasoline...something that's pretty much the same everywhere you can get it. And in doing so, we're trying to answer for whether money and time are factors significant enough (or factors at all) that would cause people to ditch their current coffee buying habits.

SO we're considering "need" and "value" here... Let's look at need first. Is coffee buying (and above that, coffee drinking) reflective of more than the fulfillment of a basic need? For the kind of customers who can be counted on to visit regularly and spend freely...the ones who can make the profit needle move and the ones McDonald's is chasing, I'd postulate that it is ...that coffee isn't a hot beverage but a part of their day with powerful ritualistic associations. Their coffee is "their coffee" consciously and they're not easily swayed or that thoroughly motivated by convenience and a few more dimes in their pocket. Though we say we "need" coffee, it's still ancillary and therefore a "reward" and we choose to reward ourselves in different ways (I reward myself just for getting out of bed!). We have choices...and if we bought coffee only to satisfy a need, then yes, any brand would do and we'd buy coffee the way we buy gas.

That brings us to value (that's "value" with a lower-case "v"). Questions of value invariably relate back to money but it's much more that just dollars and cents...value determinations involve a weighing of factors most of which are not monetary in nature.

What's misguided in McDonald's strategy and the media is neglecting in it's coverage is that for consumers, McD's, D&D and Starbucks represent three very different value propositions. For that reason, coffee drinkers self-identify primarily with one chain or another because they've determined that one versus the others is best suited to fulfill their need as they perceive it.

McD's is about cheap, fast (and there's nothing wrong with that nor is it incompatible with being able to get/provide a decent cup of coffee). With the limited focus coffee-based beverages, donuts and breakfast sandwiches, D&D is really about a comfortable ritual. And Starbucks is about choice - that your coffee should be yours in every way - you should be able to have it any temperature, strength and with any adornment you'd like. Each company's value proposition is distinct enough that for their customers, they're there for what the company's joe means to them and they're not likely to be influenced by what are really nominal differences in convenience and cost.

D&D is already convenience + cost competitive and Starbucks is neither about convenience (in terms of order fulfillment) or price. In fact, it's the complete antithesis.

So are there really battle lines in the sand? Outside the bubble of a corporate headquarters or business newsroom, the answer is emphatically NO. Wars are for possession of something. The media assumes that this "battle" is for the coffee drinking consumer. It's not. There are very few coffee drinkers up for grabs. People have already chosen sides.

McDonald's believes it can change customer's minds and win them over. It can't...at least not in the significant way it's seeking to. It's raising it's bar. Not the bar.

The most likely outcome of McD's upmarket coffee move is that McDonald's customers (and employees on break!) will get the better cup of joe that everyone deserves. And that's about it. Starbucks people will continue to sip soy mocha half-cafe lattes while they surf the internet and nosh on scones. D&D folks will happily head to work with large hazelnuts and bagel sandwiches in hand. And we'll all go on our merry caffeinated way.