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ECONOMICS REPORT - McDonald's Targets Starbucks

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This is the VOA Special English Economics Report.

McDonald's, the fast-food company, is heating up competition with the Starbucks Coffee Company. McDonald's plans to put coffee bars in its fourteen thousand restaurants in the United States. Fewer than a thousand now offer specialty coffee drinks like lattes and cappuccinos.

Just like Starbucks, each coffee bar would have its own barista, the person who makes and serves the drinks. Company documents reported by the Wall Street Journal said the plan would add one billion dollars a year in sales.

McDonald's has enjoyed several years of strong growth. The company had almost twenty-two billion dollars in sales in two thousand six.

Still, the move to compete against Starbucks carries some risk. Some experts say it could slow down service at McDonald's restaurants. And some people who are happy with McDonald's the way it is now may not like the changes.

A McCafe in Mountain View, California, on opening day in 2003
A McCafe in Mountain View, California, on opening day in 2003

As early as two thousand one, the company tested McCafes in the United States to sell specialty coffee at McDonald's restaurants. But the drinks were not available at the drive-through windows that provide two-thirds of its business. McDonald's thinks its new plan has a greater chance of success.

Starbucks, on the other hand, has faced slower growth and increasing competition. Its stock has lost about half its value since last January.

Starbucks has about ten thousand stores in the United States. Its high-priced coffee drinks have names like Iced Peppermint White Chocolate Mocha and Double Chocolate Chip Frappuccino. Lately Starbucks has added more foods, including breakfast foods, and put drive-through windows in some stores.

This week, the company replaced its chief executive officer, bringing back former C.E.O. Howard Schultz. He remains chairman of the board. He joined Starbucks in nineteen eighty-two, when it had just four stores. He is credited with building the Seattle company into an international success story.

But a year ago he warned that its fast growth had led to what he called the watering down of the Starbucks experience. Some neighborhoods have a Starbucks on every block or two. Now, Starbucks will speed up its international growth while slowing its expansion in the United States.

Millions of people have a taste for Starbucks. But last year, McDonald's Premium coffee got some good press. Testers from Consumer Reports thought it tasted better than Starbucks, and it cost less.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.

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