McDonald's threat to Starbucks?

Starbucks Corp., the world's largest chain of coffee shops, may see sales slow as people increasingly turn to McDonald's Corp. for their daily brew, a Deutsche Bank Securities Inc. analyst said Friday.

Marc Greenberg, who is based in New York, cut his target price for Starbucks shares by 14 percent to $32 from $37. He said McDonald's switch to a new coffee blend last year has improved its reputation among consumers.

"The coffeehouse is facing a new world order," Greenberg wrote in a note. McDonald's is "the very last company we would choose as competition" for Starbucks.

McDonald's, which reported monthly sales Friday that rose the most in three years, is selling iced coffee and other specialty brews at some U.S. stores. In February, Consumer Reports magazine ranked McDonald's coffee ahead of Starbucks, saying it tastes better and costs less.
McDonald's coffee has "surprisingly high" appeal, with 35 percent of consumers surveyed by the bank saying McDonald's brew got better in the past year, Greenberg said.

Starbucks spokesman Brandon Borrman declined to comment on the analyst's note. He said Starbucks is focused on giving its customers "a unique combination of premium coffee and an exceptional experience that they can get nowhere else."

McDonald's had 31,677 restaurants in 118 countries at the end of March. Starbucks operated 13,728 locations as of April.

Shares of Seattle-based Starbucks (SBUX) fell 13 cents, to $27.31, in Nasdaq Stock Market composite trading. They have dropped 23 percent this year.

Shares of McDonald's (MCD) rose $1.18, to $51.39. They have advanced 53 percent in the past 12 months, compared with a gain of 30 percent at Yum! Brands Inc., the owner of Taco Bell and KFC.