I spend too much money at my neighborhood Starbucks
Based on that anecdotal evidence, I'd say that Starbucks is good at selling non-coffee consumables. So Starbucks' recent tests of a hot breakfast item, similar to the McDonald's
Starbucks has been kicking around the hot-food concept for a while now. In an interview with The Motley Fool last February, Starbucks CEO James McDonald mentioned the idea of testing hot items. More recently, an article in Crain's Chicago Business played up the angle that Starbucks is elbowing in on McDonald's territory with the Egg McMuffin knockoff.
There are many reasons why adding hot breakfast isn't the coffee giant's best move. For example, hot food is bound to complicate in-store operations, potentially leading to mistakes and unhappy customers. Honestly, though, this doesn't concern me, especially considering that Starbucks has smoothly expanded its offerings in the past. The big problem as I see it is the risk to the company's greatest asset: its brand.
I just don't think Starbucks should want to be seen as McDonald's competitor -- but by offering a hearty bacon-and-egg breakfast, that seems to be where the company is drifting. Notably, the move comes as McDonald's is spiffing up its restaurants and rolling out premium coffee. As Edward Jones analyst Linda Bannister remarked, "McDonald's is moving more upscale, and Starbucks is moving more downscale."
Starbucks' downscale shift is potentially dangerous. The company thrives in part on customers' belief that Starbucks offers them unique, premium goods worth the higher price. When Starbucks starts getting compared to McDonald's, consumers might start wondering why they should spend so much at the coffee outfits' locations when, in many cases, they can get something similar across the street at Mickey D's. Those aren't the thoughts that Starbucks should want to brew.
Further decaffeinated Foolishness:
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.