How Starbucks Is Beating McDonald's

Although Starbucks and McDonald's menu offerings are far from identical, the two chains have a lot in common. Both are always seeking to win over busy, on-the-go consumers and gain dominance in the breakfast category. And while Starbucks is a distant second to McDonald's in terms of size and sales, there's one metric in which Starbucks has been declared the victor for the seventh year in a row: brand value.

This bit of Starbucks supremacy comes to us by way of the 2023 Restaurants 25 report, an annual release by the valuation consulting firm Brand Finance. According to the report, Starbucks has increased its brand value 17%, bringing the chain to $53.4 billion, whereas McDonald's lost brand value by 7% and sits in second place at $36.9 billion.

"Starbucks generated accelerating demand for its products throughout 2022 following a continued return to normality as pandemic-related restrictions reduced globally," the report reads in part. "Starbucks' brand value is now 30% higher than its pre-pandemic value. This success highlights the positive impact that the brand's US Reinvention Plan has had since its launch in 2022." (You can read the Starbucks press release about the reinvention plan here.)

Although this particular study places Starbucks at the top, it might be confusing considering the massive success McDonald's has enjoyed over the past year. McDonald's beat out Starbucks in app downloads both domestically and globally in 2022, with 127 million new worldwide accounts and 40 million new downloads in the United States alone. Starbucks, on the other hand, had 13.6 million downloads in the U.S. and 34 million worldwide.

McDonald's also drew success from its consistently stellar meal promotions like the Cactus Plant Flea Market Boxes, aka Adult Happy Meals. The adult-focused, nostalgia-packed offering increased foot traffic for McDonald's by more than 20% in the week it launched.

So if McDonald's is killing it on so many fronts, why in this wonderful world of business would it not be the top dog of restaurant brands? Brand Finance points to supply chain issues and the fact that McDonald's was forced to raise its prices as a result of inflation. While it's true that McDonald's did raise menu prices in Q3, it also seemed that the chain's most loyal of customers didn't care: McDonald's sales actually increased during that time, despite the higher cost.

Even if they didn't hurt sales, those price increases were enough to ding McDonald's valuation.

"Because of the macro-economic difficulties faced by the brand and market instability, McDonald's has raised prices on several popular menu items over the last 12 months," Brand Finance told Food Business News. "For a restaurant brand whose identity has relied upon low-priced products, this decision has not been taken lightly amongst consumers."

Starbucks, meanwhile, increased its value by focusing on customized beverage sales. Despite the backlash from Rewards members when Starbucks updated its loyalty program in February, the opportunity for endless customization continues to draw in crowds. This is where it has McDonald's beat, despite so many other factors leaning in the burger chain's favor. We can't help but wonder, however, whether an upcoming Senate hearing on Starbucks' alleged violation of labor laws might lead to any decrease in the brand's valuation in 2024.