It bested both Starbucks and McDonald's, wooing consumers from the counter to the grocery aisle

Jake Lynch writes at TheStreet.com/Globe and Mail: Remember when Starbucks drinkers were elitists, Dunkin’ Donuts adherents feared non-English languages and McDonald’s coffee became coff-“ay”? Thankfully, the coffee wars are over, but who won?

It wasn’t the baristas or their caffeine-addled denizens, but the one-cup commuter. Last year, Starbucks had just finished closing 600 underperforming locations when it opted to close 300 more last January and eliminate 7,000 positions. Smelling blood in the water, competitors such as McDonald’s and Dunkin’ Donuts intensified advertising and shifted strategy, with McDonald’s launching its McCafe gourmet coffees and refurbishing stores to include coffee counters, televisions and, in some cases, fireplaces.

By the end of Starbucks’ fiscal year last September, revenues were down nearly 6 per cent and same-store sales had dropped 9 per cent. McDonald’s, however, didn’t fare much better — revenues were down 7 per cent in the U.S. and globally. Even while crediting its frappes for a 12 per cent jump in second-quarter profits and 4 per cent increase in same-store sales, McDonald’s has somewhat softened its focus on in-store coffee — briefly annoying Jamba Juice with a foray into smoothies earlier this summer.

Where did all of that revenue go? Ask Green Mountain Coffee Roasters (GMCR-Q35.570.982.83%), which was more than happy to let the restaurant chains lease space, spend on ads and knock themselves out — with $1 coffee under the golden arches or low-priced, low-grade Pike Place brew for Starbucks customers who still can’t figure out the difference between American drip coffee and espresso.

Riding the success of its Keurig K-Cup single-serving coffee machines in homes and offices across the country, Waterbury, Vt.-based Green Mountain exploited partnerships with Newman’s Own, Tully’s and Caribou Coffee (CBOU-Q10.180.121.19%) en route to 56 per cent sales growth each year for the past three years.

A homemade cup of coffeehouse-quality brew was the caffeine addict’s drink of choice, as the National Coffee Association trade group’s 2010 National Coffee Drinking Trends Study showed a jittery 86 per cent of Americans preparing their coffee at home — percolating 4 per cent from last year. Of the 56 per cent of Americans who drink coffee, the study found that 16 per cent changed their drinking habits as a result of the economy. With 40 per cent of all coffee consumed considered to be “gourmet,” that meant a shift from the counter to the coffee aisle.

Read more at: The Globe and Mail