In a shot across the bow at Starbucks Corp., McDonald's has announced it will serve specialty coffee beverages like vanilla lattes and caramel cappuccinos at outlets across the U.S. The drinks are already available at McDonald's restaurants in Michigan, New York and New Jersey. McDonald's is pricing espresso-based drinks between $2 and $3, undercutting Starbucks, many of whose similar offerings are over $3. The high-end coffee drinks will also compete with Dunkin' Donuts, which has widened its specialty coffee offerings and plans to offer them nationally. McDonald's new focus on high-end coffee is consistent with an overall strategic shift away from its traditional burger-and-fries offerings and toward more "upscale" food, like chicken and salad. McDonald's specialty coffee drinks will be served from push-button machines, which are faster than Starbucks' labor-intensive hand-made approach. Starbucks, meanwhile, has not been idle: last fall, it announced plans to offer hot breakfast sandwiches in an appeal to fans of the McDonald's Egg McMuffin.
Sources: Wall Street Journal, Reuters
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Stocks/ETFs to watch: McDonald's Corporation (MCD). Competitors: Starbucks Corp. (SBUX), Burger King Corp. (BKC), Yum! Brands Inc. (YUM). ETFs: Vanguard Consumer Discretionary ETF (VCR), iShares Dow Jones US Consumer Services (IYC), PowerShares Dynamic Food & Beverage (PBJ)
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