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McDonald's Wooing the Starbucks Faithful

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Espresso with your McNuggets?

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Starbucks (SBUX) employees driving to the corporate headquarters in Seattle are greeted with a billboard proclaiming, "4 bucks is dumb."

It's part of the campaign for McDonalds' (MCD) latest offering: Espresso - and the hamburger chain plans to slug it out with Starbucks on price. That looks like a smart move in the current economy.

Other billboards in western Washington State, including some near Starbucks, declare "large is the new grande" as McDonalds launches class warfare against what it sees as a hopelessly snobby competitor.

So far, Starbucks has remained blissfully above the fray. The bet: Its customers would never go to McDonalds for a small, medium or large anything.

Starbucks has depended on word-of-mouth to build the brand among like-minded souls for years and the plan has worked well. The company recently aired 2 TV commercials, but neither mentions McDonalds by name - or even hints that the purveyor of cheeseburgers has entered the coffee market, the Seattle Post-Intelligencer reports.

The first ad, on Saturday Night Live, said Starbucks would offer free coffee to anyone who voted on November 4th, drawing a few yelps from good-government types. The second ad said Starbucks would donate to a fund for AIDS victims in Africa.

In "The Ballad of East and West," Rudyard Kipling wrote, "East is East, and West is West, and never the twain shall meet." He had the differences between Europe and Asia in mind, but someone tapping on a laptop at Starbucks is bound to make the same point about upscale coffee and the presumed swill at hamburger stands.

Don't be so sure.

Consumer Reports magazine hired trained testers to sample a medium cup of black coffee from McDonald's, Burger King (BKC), Dunkin' Donuts and Starbucks.

McDonald's "beat the rest," the magazine said. Coffee from the Golden Arches was "decent and moderately strong."

The cross-market coffee wars rage in Cambridge, Massachusetts, home to the brainiacs at Harvard and MIT, where Dunkin Donuts is making converts. As part of its upscale move, Dunkin Donuts offers healthy food such as low-calorie sandwiches made with egg whites.

Many people love to hate Starbucks, and more than a few cheered when Starbucks announced plans to close 600 stores in the US.

That's just the free market at work - ain't it grand? But imagine: Espresso at McDonald's, right up there alongside the French fries?

The damn yuppies are taking over the world.
No positions in stocks mentioned.
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