Wall Street analysts are predicting Starbucks could finally surpass McDonald’s to become the world’s most valuable restaurant chain.
It’s the battle for your disposable cash that sees two global franchises battling it out for global domination. Wall Street analysts are predicting coffee-chain Starbucks could finally surpass fast-food giant McDonald’s to become the world’s most valuable restaurant chain.
McDonald’s reported sales were on the rise again in 2015 after experiencing a dip in recent years, after the franchise was taken over by a new chief executive, Steve Easterbrook.
However, last year was a tough year for the restaurant industry, with deflation, uncertainty and increased competition contributing to a slowdown in sales at the burger chain towards the end of last year.
Now Wall St experts say Starbucks potentially could outrank the Golden Arches as the most valuable restaurant chain in the world, making it the first competitor to do so in more than four decades.
“We believe that it is only a matter of time before Starbucks overtakes McDonald’s as the largest market cap restaurant stock,” Mark Kalinowski, stock analyst with Nomura, told the Financial Times. Although, he added this change isn’t likely to take place this year.
McDonald’s’ market value peaked at $116bn (€108bn) last year, however it has since fallen to $97bn.
After dominating the fast food market for decades, several factors have caused the company’s growth to slow. Food deflation, increased competition, and uncertainty in the lead-up to the presidential election brought tough market conditions to the American restaurant business last year, affecting McDonald’s sales in the final months of the year.
Others say McDonald’s has been slow to change, or to embrace technology.
With millennials overtaking baby boomers as the biggest demographic group, more and more restaurants are focusing on offering their customers convenience apps and one click, or even zero click, delivery options.
Use of these apps also helps companies build up invaluable knowledge about their customer base.
And while McDonald’s growth slowed down, Starbucks’ rapidly expanded. According to media reports, the chain achieved same-store sales growth of at least 5% during 26 of the past 28 years, a trend that appears will continue throughout 2017.
The company is also aiming to increase stores worldwide by 8% by September, at the same time as increasing its overall global sales by 5%. If the brand is successful, Mr Kalinowski said it could see Starbucks’ earnings per share grow by 12% and its revenue expand into double-digits.
But McDonald’s is not prepared to give up its title without a fight, with a major revamp planned across stores this year, including self-service kiosks, table services, and an interior redesign to appeal to a younger demographic.
A home-delivery system in partnership with Uber is also due to be piloted in the US.
Changes to the classic menu are also on the table, as customers will be able to customise the size of their Big Mac for the first time and regional variations will be available across the States.
The company will also start to offer cheaper coffee alternatives, in a bid to undercut its main rival. Plans for a mobile payment system to be introduced later this year are also under way, although McDonald’s will have to catch up to the 8m Starbucks customers who are currently using the coffee chain’s system.
Coffee to go is putting McDonald’s on the run.
At a glance
© Irish Examiner Ltd. All rights reserved