Last updated December 10, 2008 9:27 p.m. PT

Starbucks won't slug it out in ad wars

Coffee chain says it'll take high road

By ANDREA JAMES
P-I REPORTER

McDonald's has erected a billboard in sight of Starbucks headquarters declaring, "four bucks is dumb."

If Dunkin' Donuts' taste test commercials were the schoolyard equivalent of blowing spitballs at the coffee giant from afar, then the latest from McDonald's is like pulling a wedgie. Starbucks employees driving northbound can see the billboard on their way into the city.

Another billboard slogan jabs, "large is the new grande." The two phrases are displayed on 140 billboards in Western Washington, some of them near Starbucks cafes.

"The billboard placement was done because we picked high visibility locations," said Alan Finkelstein, who owns four McDonald's in King County. "We really wanted to point out that ordering an espresso at McDonald's is quick and simple. Small, medium and large. It's easy."

Earlier this year, McDonald's started unsnobbycoffee.com to promote the launch of espresso drinks in the Seattle market.

Will Starbucks respond in kind? Unlikely.

While the coffee wars received much media and Wall Street trumpeting this year, Starbucks has been mostly silent, maintaining that its customer base is different.

Starbucks could fire back that not all of its coffee costs four bucks, or that extra cents help pay for health care for baristas. (A 12-ounce cup of brew starts at $1.40 at Starbucks, a penny more than the average McDonald's brew price. A small McDonald's latte costs $1.99 compared with $2.45 to $3.15 at Starbucks.)

Instead, it is fighting back in a more subtle way. Executives have hinted that Starbucks is taking the high road.

"We get a lot of questions on the competition and that everyone seems to be picking on Starbucks through their advertising and try to reposition Starbucks as expensive or snobby, and, boy, when is Starbucks going to start advertising and join in that coffee conversation?" Starbucks Chief Marketing Officer Terry Davenport told investors last week in New York.

"We're not going to get into that conversation. We're not going to get sucked into the, 'My coffee is better than your coffee,' price point type of coffee conversation. We're going to play at a much higher level."

Starbucks is relatively new to the advertising game after two decades of building its brand on word of mouth. However, armed with newly hired advertising agency BBDO New York, Starbucks placed two commercials recently. One, which ran during the "Saturday Night Live" show before Election Day, advertised that Starbucks would give out free coffee Nov. 4.

The second ran on the heavily traveled Wednesday before Thanksgiving, on the Weather Channel and CNN, to let customers know that Starbucks would be donating portions of coffee sales to help African AIDS victims.

The coffee giant also is turning to cheaper modes of advertising via YouTube, Facebook and Twitter.

During an interview that aired this week with CBS anchor Katie Couric, Starbucks Chief Executive Howard Schultz made clear his feelings about one of the rivals.

"I think the way we deal with that is not to respond to something that's that frivolous," he said. "Are you going to say to your friend, 'Let's go meet at Dunkin' Donuts?' Are you going to say that?"

He pointed out the "Saturday Night Live" advertisement as a success. "We had an amazing response to that. Amazing."

More insight into how Starbucks' top brass really feels about McDonald's and Dunkin' can be found in ousted Chief Executive Jim Donald's severance agreement, in which he was prohibited from working for either competitor, but was permitted to work for Burger King.

Even though Starbucks won't play along publicly, it's still fun to pick on the company, said consumer anthropologist Robbie Blinkoff, who studies consumer reaction to the financial crisis.

"It's even more fun now with the economy," Blinkoff said. "I'm back and forth about my love, hate with Starbucks. I love to hate them."

A new type of consumer, more conscientious, less vain, is emerging. Fewer will be "slaves" to Starbucks, he said.

"We're going to come out with a new identity. It doesn't mean that people won't go in and buy a Starbucks cup of coffee, but they'll know why they're buying it again. It's more like a reboot."

The advertising campaigns against Starbucks signal a shift in the rules, especially when a corporate behemoth such as Oak Brook, Ill.-based McDonald's goes after a company half its size.

The commonly held wisdom that attack ads are an underdog's game no longer applies, said Emily Bryson York, a Chicago-based food reporter for Advertising Age.

Attack ads are popular right now: Mac vs. PC. Campbell's vs. Progresso. Dunkin' vs. Starbucks.

"A big part of this is the economy and marketers feeling like the economy is in horrible shape, people have fewer discretionary dollars and you have to sharpen your elbows," York said.

McDonald's is trying to build up its coffee credibility.

"That at least seems to be why they're going after the Seattle market so aggressively," York said. "The thing about these comparative campaigns is you have to hammer away at them for a long time. You can't just hit someone and then run away. You have to have a lot of marketing dollars to put behind it and that's something that McDonald's could theoretically do."

It's unclear whether McDonald's will take its "four bucks is dumb" campaign national. Nationwide, 4,000 out of 13,000 McDonald's restaurants sell espresso and the number is growing. Out of the 190 McDonald's in Western Washington, 155 sell espresso.

"We see ourselves as trying to enter a new category and steal as much of the breakfast and coffee share as we can garner," said Kelly Hoyman, Northwest region marketing director for McDonald's.

The fact that "four bucks" sort of rhymes with "Starbucks" is not on purpose, said John Livengood, executive creative director at DDB Seattle, McDonald's advertising agency.

"The idea is, in a billboard, you got three or four seconds to capture people's attention," he said. "You're trying to be as short and sweet and as pithy as possible."

No matter what McDonald's does, Starbucks is likely to stay on its own message, and surgically pick advertising spots that promote social responsibility.

Says Starbucks chief marketer Davenport: "The answer to how we're going to respond to the competition is we're not going to respond. We're going to keep doing what we do and we're going to keep doing it our way."

P-I reporter Andrea James can be reached at 206-448-8124 or andreajames@seattlepi.com.