Tuesday, February 16, 2010

Burger King to sell Seattle's Best Coffee, boon to owner Starbucks (BKC, MCD,SBUX)

The associated press, of all places, has the breaking news that Starbucks will take a slap back at the McDonald's effort to snatch morning joe drinkers.  Seattle's Best Coffee - owned by Starbucks - will be sold in 7,000 Burger King locations.

From the report:

CHICAGO (AP) -- Burger King plans to launch a massive new coffee line as it tries to overhaul its breakfast menu and boost its slumping business.
The nation's No. 2 burger chain will add Starbucks Corp.'s Seattle's Best Coffee to all its U.S. restaurants in a phased roll-out that begins this summer, executives told The Associated Press on Tuesday.
The move takes a page from rival McDonald's Corp.'s success with its McCafe line of coffee drinks, which have been credited with boosting its performance. The deal also adds a new wrinkle to the coffee wars, because McDonald's coffee campaign has been seen as taking aim at Starbucks.
"We'll be delivering a better cup of coffee," said John Schaufelberger, senior vice president of Burger King's global product marketing and innovation, who said improving the company's breakfast business is among the chain's "top strategic priorities."
Under the effort, more than 7,000 Burger King restaurants will begin sell the coffee along with iced varieties that also come with a choice of plain, vanilla or mocha flavors and whipped toppings. While prices will be set by franchise owners -- who operate 90 percent of the chain's locations -- the brew's suggested prices range from $1 to $2.79. Drinks will be sold all day.

The revenue from each coffee sold that ends up in Starbucks' pockets is unclear, but a lowball estimate to me is $75million, which flows immediately near the bottom line.  After taxes, say $50million or 7cents per share.  A PE of 15 would boost Starbucks stock price by a bit over $1.00 per share.  The shares are part of the way there, spiking today along with Burger King, while McDonald's trails....

Copyright 2010 AlphaNinja

No comments:

Post a Comment