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In a counterattack against its lower-priced fast-food rivals, Starbucks Corp. plans to roll out a second coffee brand. By autumn, Seattle's Best Coffee—a former competitor Starbucks acquired seven years ago—will be sold in about 30,000 fast-food outlets, supermarkets and coffee houses, the company said. Currently, Seattle's Best coffee and coffee beans are sold in the chain's own shops inside nearly 500 Borders bookstores, as well as in about 2,500 supermarkets.
Eventually, Starbucks said, the brand will also be sold in convenience stores, drive-through kiosks, coffee carts, vending machines and mobile trucks. The company has already reached deals to sell Seattle's Best at Burger King and Subway restaurants and at AMC Entertainment Inc. movie theaters. The new push by Starbucks is a response to the invasion of the specialty-coffee market by McDonald's Corp., Dunkin' Donuts and other fast-food chains, which offer espresso-based drinks at lower prices than Starbucks.
In the past three years, the percentage of Americans drinking premium coffee has jumped to 35% from 29%, says Tom Ehlers, a veteran Starbucks executive who is now vice president of retail for the Seattle's Best unit. "Regular people have found their way to great coffee." Mr. Ehlers likened the Seattle's Best venture to Old Navy, the Gap Inc. discount chain that now rivals the Gap chain in size.
Associating Starbucks with a product sold from vending machines could also damage the brand's upscale image. And it could cannibalize Starbucks customers. "I've always preferred Seattle's Best to Starbucks, which tastes burnt to me," says John Joyce, a Chicago construction contractor. But Seattle's Best is intended to appeal to just this sort of Starbucks critic. For those who find Starbucks coffee too strong-tasting, Seattle's Best is promoting the "smoothness" of its blend in ads and promotions. For those turned off by the prices and ambiance at Starbucks stores, Seattle's Best is touted as "unpretentious."