Starbucks (SBUX) Fires Back At Dunkin' Donuts

Earlier in the week, Dunkin’ Donuts made a big deal about its new plan to team up with Procter & Gamble (PG) to sell its coffee at retail outlets like Wal-Mart (WMT) and Kroger (KR). Dunkin’ has 5,400 stores and would like to eat as much of Starbucks’ (SBUX) as it can.

The management at Starbucks must have been upset. Yesterday, their shares moved way down at the open and stayed down all day.

Not to be outdone, Starbuck’s immediately announced that it "sees ample room for growth in selling Starbucks-branded products such as coffee beans, ice cream and chocolate in supermarkets and convenience stores ," according to Reuters. Packaged coffees account for about two-thirds of Starbucks consumer products group’s revenue, which reported a 24 percent increase in net revenue to $87.1 million in the quarter ended July 1. The segment accounts for nearly 20 percent of Starbucks’ total operating profit.

Starbucks packaged coffee is more expensive than other brands, and the company believes that consumers will pay for higher quality stuff.

Maybe. By, maybe the announcement is a sign that Starbucks is worried. Its stock is still near a 52-week low, even though its last quarterly report show 20% revenue growth. But, same-store sales were only up about 4% so marketing products through retail outfits like grocery stores may become a bigger part of its business.

But, of course, it will have to compete with the likes of Dunkin’ Donuts.

Maybe McDonald’s (MCD) would be willing to sell the Starbucks prepacked stuff.

Douglas A. McIntyre