Starbucks (SBUX) Begins To Thrash McDonald's (MCD) In Coffee Wars

McDonald’s (NYSE:MCD) was supposed to crush Starbucks (NASDAQ:SBUX) in the premium coffee business when the world’s largest restaurant chain introduced a line of premium java more than a year ago.

It turns out that McDonald’s impressive start as competition to Starbucks, Dunkin’ Donuts, and other specialty coffee retailers has begun to flag.

New research shows the momentum in terms of store traffic patterns has turned in Starbucks’ direction and it is likely that the trend will continue.

New research done in September by ChangeWave shows that those surveyed were 5% more likely to buy coffee from Starbucks in the upcoming 90 days than in the 90 days just past. The figure for McDonald’s was down 3%. Starbucks almost made gains in the previous survey. The research confirms what Wall St. has suspected that the coffee store chain is doing well. Its shares are over $20, near a 52-week high and up from a period low of $7.06.

In the restaurant category, the companies that can expect an improvement in traffic, according to ChangeWave ,are Olive Garden (NYSE:DRI), Chipotle (NYSE:CMG), and Red Lobster. Denny’s and Morton’s are likely to do more poorly.

Looking at trends across the industry, ChangeWave reports better than one-in-ten respondents (11%) now say they will spend more money at restaurants going forward. That represents a 1 point improvement over August. Another 36% say they will be spending less, also 1 point better than before.

Douglas A. McIntyre