Best coffee on high street? Not Starbucks

Starbucks, the world’s largest coffee chain, has introduced a $1 bottomless cup of coffee in its battle against an ever-growing band of imitators and cheaper competitors.

Faced with fast-food restaurants such as McDonald’s and Dunkin’ Donuts muscling into the coffee market by selling cups of premium roast for a little over a dollar, the Seattle-based coffee company looks ready to start a price war.

So far, the $1 (50p) cup of filter coffee is available only in a small number of branches in Seattle and the chain would only confirm that the concept was in a testing phase. For $1, the customer gets an 8oz cup of drip coffee which can be refilled as often as he likes.

The cost is about 50 cents less than the cheapest cup available in most Starbucks coffee houses and, more significantly, it undercuts several fast-food restaurants.

Dunkin’ Donuts declares itself to be “the number one retailer of hot regular coffee by the cup” in the United States. A 10 oz. cup of coffee in one of their restaurants costs $1.39.

McDonald’s, which is attempting to modernise its image as a purveyor of only fattening hamburgers and fries, sells coffee for $1.07 in America. It has announced that it will introduce coffee bars in all its restaurants across the country to compete more aggressively.

Starbucks remained reticent over plans to roll out the scheme to the rest of the US or elsewhere in the world. It refused to confirm how many stores were part of the test or when testing began. “Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience,” the company said in a statement.

Starbucks shares rose $1.42, or 7.6 per cent, to close at $20.09 last night after news of the scheme. The stock has traded between $17.66 and $35.67 over the past year.

At the other end of the caffeine hierarchy a new challenge to the coffee orthodoxy has arrived in the US. Premium coffee retailers have long coveted espresso machines costing tens of thousands of dollars but a new breed of coffee brewers has been introduced that cost as much as $20,000.

Makers of these machines, complete with halogen heating elements and bamboo paddles, claim that they brew coffee with juicier and more refined tastes than any espresso machine.

The dominance of cappuccinos and espressos may be under threat as Starbucks has just invested in two of the cult Clover models for $11,000 each.

The coffee company has been looking for new solution to its faltering growth this year. Howard Schultz, its chairman, who recently returned as chief executive after the company dismissed Jim Donald, its Chief Executive, acknowledged that the struggling US economy seemed to have contributed to the decline. The company also suffered as its raw material costs soared, with milk prices increasing sharply.

Until now the company has played down the threat of competition and Starbucks has attempted to raise revenue by introducing two price rises in the past year. Those increases have helped to steady income, which at the end of last year had fallen for the first time since 1992.

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