retail news in context, analysis with attitude

BIGresearch is out with its May 2009 Consumer Intentions & Actions (CIA) Survey, suggesting that McDonald’s is making gains in the ongoing coffee war that it is waging against Starbucks.

According to the survey, Starbucks remains number one among consumers, but McDonald’s is making gains … and the fast feeder’s current $100 million ad campaign promoting its McCafés is expected to grow sales even more.

According to the BIGresearch analysis, there are some fairly stark demographic differences between the two retailers’ shoppers:

“McDonald's coffee drinkers (those who purchase coffee most often from McDonald's) tend to be older than Starbucks drinkers with an average age of 47.7 (vs. 39.2 for Starbucks drinkers). 46.8% of Starbucks drinkers are in the 18-34 age range, compared to 25.8% for McDonald's. More Starbucks coffee drinkers are single at 29.1% (vs. 19% of McDonald's drinkers) and a higher percentage hold professional/managerial positions at their place of work (27.2% vs.15.7%). They also report a higher annual income of $67,487 vs. $55,572.”

There are some other differences between the two customer bases:

• 33.7% of McDonald's coffee drinkers are confident/very confident in the economy, vs. 30.3% of Starbucks drinkers.
• 72.7% of McDonald's drinkers are focusing more on needs over wants, vs. 65.7% of Starbucks drinkers.
• 44.2% of McDonald's drinkers are buying more store brand/generics vs. 36.2% of Starbucks drinkers.
• 26.4% of McDonald's drinkers feel better about their economic situation, vs. 34.4% of Starbucks drinkers.
• 20.8% of McDonald's drinkers are starting to spend more on discretionary items, vs. 21.4% of Starbucks drinkers.

KC's View:
None of this is huge surprising, but it is interesting to see it in sharp relief.

The problem for Starbucks is that, having created an entire generation of latte and cappuccino drinkers, it is seeing McDonald’s peel off the demographic that is more comfortable with Mickey D’s pricing, image, etc… And in a recession, McDonald’s target consumer demographic actually is getting bigger.

It is hard for the company that creates an industry to keep innovating at the kind of level that prevents competitors from stealing market share…and this proves, yet again, that there is no such thing as an unassailable advantage. There are only a series of assailable advantages, and you have to keep coming up with them. In the always wise words of my friend Norman Mayne, “you have to innovate faster than the competition can steal from you.”