Ad campaign touts price after Starbucks spots focused on quality

Specialty coffee retailers, now including the nation’s biggest hamburger chain, are hoping new ad campaigns and price cuts that start this week will entice more latte lovers to take a sip.

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McDonald’s Corp. on Tuesday began a more than $100 million marketing campaign including TV, radio, print, online and outdoor ads for its McCafe line of espresso drinks. The drinks are now being rolled out to the chain’s 14,000 U.S. locations.

The ads portray the drinks as the antidote to a miserable day and aim to get consumers to see the beverages as affordable, quality alternatives to lattes at more gourmet chains like Starbucks Corp.
“We think that the timing is right,” said McDonald’s USA President Don Thompson. “We think the opportunity is right.”

Just two days earlier, Starbucks ran — on a full page in the Sunday New York Times — the first ad of its new campaign, which positions its drinks as higher in quality than the competition and less pricey than consumers might expect.

Starbucks sales have slid as consumers bypass lattes and other small luxuries to save money.
The company has been trying to appeal more to value-conscious consumers to bring sales back up and announced Tuesday it will sell grande iced coffees for $1.95 — 25 cents to 45 cents less than usual. Most of the chain’s prices vary by location, but all company-owned stores will sell grande iced coffees for $1.95 through June 29.

Jean-Pierre Dube, professor of marketing at the University of Chicago Booth School of Business, said it is “extremely important” for McDonald’s to advertise their new drinks right now during the recession because they cost slightly less than others in the sector.

McDonald’s and Starbucks aren’t the only ones trying to bring in customers through ads or price cuts.

Dunkin’ Donuts said Monday its New York, New Jersey and Connecticut locations are rolling back latte prices about 15 percent.

A small hot latte will now cost $1.99, down from $2.59 on average, and a small iced latte will be $2.49, down from $2.79.
Flavors like vanilla or hazelnut can be added at no extra charge, the company said.

Dunkin’ is also offering its Chicago customers small lattes — hot or iced, with flavors added or without — for 99 cents beginning May 11 through June 20. Dunkin’ Donuts is owned by Dunkin’ Brands Inc., which also owns Baskin’ Robbins. Dunkin’ Brands is owned by Bain Capital, The Carlyle Group and Thomas H. Lee Partners.

Shares of Starbucks fell 10 cents to $14.14 in afternoon trading while shares of McDonald’s rose 59 cents to $53.36.