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Starbucks, the Best Coffee Money Can't Buy

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If you spend $5.25, five days a week, on your favorite frappuccino at Starbucks, that comes to $26.25 a week and $1,365 a year.

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Here's "The Next Big Thing" for an aspiring entrepreneur: Selling work – real tasks – to all those folks earnestly tapping on the laptops at Starbucks (SBUX) as they guzzle Cinnamon Dolce lattes at $4.70 a pop.

What do all those people do, and why do they do it at Starbucks? One theory: That's where all the spam, now stacking up in your e-mail's junk file, comes from.

Nevertheless, Starbucks gets the Genius-in-Perpetuity award for spotting the market for Java Chip coffee at $4.95 a cup. However, the proletariat may be rising because, according to Consumer Reports, a cup of mud at McDonald's (MCD) beats the frou-frou stuff at Starbucks.

No kidding.

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

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

You know there's got to be a yuppie dig in this somewhere, and here it is: "Although [McDonald's coffee] lacked the subtle top notes needed to make it rise and shine, it had no flaws".

"Subtle top notes", eh? Sounds like someone is a frustrated wine writer.

Starbucks coffee, Consumer Reports said, "was strong but burnt and bitter enough to make your eyes water instead of open".

Any immensely successful, paradigm-changing (if you'll pardon an undergraduate compound adjective) enterprise will have its detractors – Microsoft (MSFT) comes to mind – and Starbucks is no exception. Some coffee drinkers swear that Peet's Tea & Coffee, founded in Berkeley's "Gourmet Ghetto" when gasoline was cheap and Fords were land arks, is fresher and beats the bejabbers out of Starbucks.

Others pledge their allegiance to Dunkin' Donuts and its java, including at least one ink-stained (pixel-tarred?) wretch. Consumer Reports ranked it behind McDonald's and Burger King, but ahead of Starbucks.

No matter. Starbucks is immensely profitable. For the 13 weeks ended April 1, the company earned $150.8 mln on sales of $2.3 bln, compared with earnings of $127.3 mln on sales of $1.9 bln for the same period a year ago. Starbucks plans to release 3Q earnings after the market closes on August 1.

Starbucks now has about 13,000 stores and plans to expand to about 40,000. That should pump out enough coffee to make you start chewing on other people's fingernails.

Do the math, Orange Mocha Frappuccino addicts. If you spend $5.25, five days a week, on your favorite frappuccino (not to be confused with France's force de frappe) at Starbucks, that comes to $26.25 a week and $1,365 a year. (We'll assume you're virtuous on weekends and get your caffeine jolt from off-the-shelf carbonated beverages. The annual total includes the $52.50 you'd spend swilling Starbucks during your annual two-week vacation.)

Golly, that's a lot of money.

Come to think of it, the money you spend each year on fancy coffee at Starbucks would buy 75 copies of the latest Harry Potter book ($17.99 on Amazon.com (AMZN)), 682 sight-seeing trips on the New York subway at $2 a pop, or 70 new button-down shirts from L.L. Bean at $19.50 each.

Why do people spend big bucks on "gourmet" coffee? C'mon comrade, if you're trying to make an impression on the office cutie, do you want to be seen swilling $1.35 coffee from McDonald's?

Why this is true will be left to the shrinkologists, who will probably charge $200 an hour, or 38 frappuccinos at Starbucks. However, this assumes such a weighty question can be answered in one hour.

In the mean time, there are worse things than sitting at Starbucks and tapping away at a laptop… assuming you can call this work.

In any case, this story comes to you at no charge.

Just don't get snippy and say it's free – and worth it.
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No positions in stocks mentioned.
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