Comparing Starbucks and McDonald's may not seem to make sense at first, but the two chains actually have a lot in common--namely, they both promise quickie and easy food and beverages on the go, and both companies have recently ramped up sustainability efforts. In the new book The HIP Investor, author R. Paul Herman attempts to compare the two mega-chains. Below, we do the same.
Let's just be clear--the inherent unhealthiness of most McDonald's meals give the chain a major disadvantage, even when compared to Starbucks' high-calorie Frappucinos. That being said, McDonald's has made some inroads in sustainability. A few examples: a "green" McDonald's that offers an EV chargepoint, LED light fixtures, drought tolerant landscape plants, and an Energy Efficiency Education Dashboard; an environmental scorecard for suppliers; a successful sustainable fisheries program; and a next-generation fryer that allows restaurants to cook the same amount of product while using approximately 40% less oil than with traditional fryers.
But there's still plenty that would be would like to see. How about smaller portion sizes, for example? And yes, we realize that the "supersize" option is no longer available--but that's not enough. In an interview with R. Paul Herman, Bob Herman, the VP of Corporate Responsibility at McDonald's, explained, "We are offering choice--new menu items and new portion sizes, giving information to make these choices. This is a significant thing to do." McDonald's would also do well to use more grass-fed beef and increase its use of organic fruits and vegetables. And then there's the most disturbing question of them all: Why don't McDonald's burgers decompose?
Starbucks fares better on all counts. The coffee chain has a goal of using only responsibly grown and ethically traded coffee by 2015, and it hopes to have 100% reusable or recyclable cups by the same year. Starbucks takes the extra step of offers farmers incentives to prevent deforestation, with pilot programs currently underway in Sumatra, Indonesia, and Chiapas, Mexico. The company is also well-known for its partner (AKA employee) health care--the chain does, in fact, spend more on health care than on coffee bean purchases.
Is Starbucks perfect? Of course not. While McDonald's caters to a crowd specifically interested in fast food chains (if they don't go to McD's, they will probably head to Burger King or Wendy's), Starbucks has the unfortunate tendency to challenge local coffee shops for much-needed business. But the company is moving quickly toward sustainability, and so we have to declare it as the winner.
Check out the full HIP Investor chart below.
| McDonald's | Starbucks | |||
| Overview | Over 31,000 restaurants in 118 countries; $23.5 billion revenue, 400,000 employees | Over 16,000 locations in over 50 countries, $9.8 billion revenue (FY09); 117,000 partners (employees) ** | ||
| Product | Premium salads, fruit and yogurt parfait, and apple dippers in Happy Meal choices; packaging gives customers essential nutrition information in easy-to-understand icon and bar chart format | In U.S., spends more on partner health care than coffee bean purchases; The largest purchaser of Fairtrade certified coffee in the world ** | ||
| Management Practices | 19 of 25: Carefully managing supply chain to control costs and implement sustainability, and developing an environmental scorecard to measure supplier performance | 21 of 25: Sustainability built into business vision, all performance metrics and product development decisions; From fiscal 2000 to 2009, farmer loan commitments totaled $14.5 million, goal is $20 million by 2015; Partners encouraged to volunteer, with a goal of 1 million hours of community service by 2015 ** | ||
| Health of 20% | In 2009 customer satisfaction is 70%; 82% of crew would recommend working at McDonalds to a friend | 10% | Customer satisfaction is 76%; all staff more than 20 hours/week have health care access | 14% |
| Wealth of 20% | Crew members earn an average of $7.60 per hour; 93% of eligible employees participate in 401(k) plan, made easier by $20 per month auto-deductions | 9% | Starbucks average hourly pay rates vary across the U.S. and the globe; baristas in the U.S. are eligible for a base rate increase after six months, and a performance based increase every six months thereafter.; The Stock Investment Plan allows eligible partners to buy Starbucks stock (up to 10% of base pay) at a 5% discount; Through the Bean Stock program, stock options granted annually to eligible partners in 16 countries from part-time hourly up to (but not including the director level based on the company's performance ** | 13% |
| Earth of 20% | About 82% of the consumer packaging used in its nine largest markets made from renewable materials and 30% of the material comes from recycled fiber. Despite testing of innovative materials, have not yet identified more sustainable packaging materials that are commercially viable | 9% | In fiscal year 2009, Starbucks served more than 26 million beverages in reusable cups, and approx. 70% (2,163) of its company-owned stores in North America that control their own waste collection recycled items made from one or more materials; Starbucks is working toward 100% reusable or recyclable cups by 2015 ** | 12% |
| Equality of 20% | 37% of all U.S. owner-operators are women and minorities; 26.7% of worldwide leadership are women | 15% | Among managers, approx. 31% are ethnic minorities and 66% are women (6/1/2008-5/31/2009)** | 12% |
| Trust of 20% | Guidelines to determine the sustainability of fisheries developed in partnership with Conservation International | 14% | All suppliers that adhere to C.A.F.E. status undergo third-party verification; By 2015, Starbucks' goal is to purchase 100% responsibly grown and ethically traded coffee, which the company defines as coffee that has been third-party verified or certified, either through Coffee and Farmer Equity Practices, Fairtrade, or another externally audited system ** | 13% |
| Human Impact TOTAL, of 100% | Summary: McDonald's could stand to improve its sustainability, especially where food sourcing is concerned | 56% | Summary: Starbucks trounces McDonald's on almost all counts | 64% |
| Corporate Profit of 20% | +30.1% return on equity (2008) +20.4% annualized total return, including reinvested dividends (6/2004–6/2009 +23.4% annualized total return, including reinvested dividends (6/2006–6/2009) | +12.8% return on equity (fiscal 2009) -6.2% annualized total return, including reinvested dividends (6/2004–6/2009) -16.3% annualized total return, including reinvested dividends (6/2006–6/2009) |
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In my opinion, McD still beats Starbucks because they are now offering wide selection coffee with lower price to compete with Starbucks. Furthermore, McD already have variety of fast food for customers. Customers would want to go get their cheaper coffee and food at the same time to save time. McD also offers different size of meals for customers, for customers who wants to cut down on their food budget with the current recession, it is a good place to eat and get their coffee. In contrast, Starbucks simply cannot compete with Mcd's wide selection of food and their higher price coffee.
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