McDonald's and Starbucks Battle in Europe

In the United States, the battle between Starbucks (SBUX) and McDonald's (MCD) is still in its "looming" stage, as Mickey D's completes a massive move into high-end coffee drinks with its McCafé stores, and Starbucks continues to struggle just to hold on to its existing clientele.

In Europe, though, the fight is well under way, and oddsmakers so far seem to be giving the advantage to McDonald's.

At 24/7 Wall St., Douglas A. McIntyre explains "Why McDonald's Will Crush Starbucks in Europe." Essentially, it's because McDonald's is strong and Starbucks is weak and getting weaker.

"The region is already one of McDonald's best in terms of sales growth," McIntyre notes. "It can afford to finance the rent and construction costs for new locations. It has a nearly bottomless marketing budget. And, in most cases it can and will undercut Starbucks on price."

Starbucks, meanwhile finds that its "solutions are non-existent."

McDonald's plans to open several hundred McCafé stores in Europe this year, bringing the number of outlets to about 1,200. Starbucks, meanwhile, is cutting back on its plans for expansion in the region.

Many of the new McCafés will open in the United Kingdom, where about half of all European Starbucks are located. Jerome Tafani, finance chief of McDonald's Europe, told the Financial Times that the chain "can become the biggest seller of coffee in Europe."

And Tafani noted a major advantage McDonald's has over Starbucks: New McCafés can be opened in already existing restaurants at a much lower cost than opening a stand-alone store.