Burger King Corporation, a subsidiary of Burger King Holdings, Inc. (BKC), the world's second largest fast food hamburger chain stated recently that it has inked an agreement with Seattle's Best Coffee, a subsidiary of Starbucks Corporation (SBUX), the leading roaster and retailer of specialty coffee in the world. As per the contract, Starbucks will supply Seattle's Best Coffee in Burger King restaurants in Canada this fall.
In response to McDonald's Corp. (MCD) McCafe coffee products, in the month of February Burger King said that by September 2010 it would begin selling Starbucks Seattle's Best Coffee in about 7,250 U.S. outlets. The new drinks will sell for $1 to $2.79 and will replace Burger King's BK Joe brew, which was introduced in 2005.
Starbucks purchased the Seattle's Best brand in 2003, and since then has been renewing the brand to expand its customer base. The coffee is already available in Alaska Airlines, Borders bookstores and Royal Caribbean Cruise Lines, and Starbucks is further expanding it through franchises and retailers.
Burger King is well positioned to sustain growth in the existing and new markets through new product introductions, an upgraded prototype design, and expanded restaurant hours. Nearly 200 company-owned restaurants operate around the clock in the U.S. We think this will bolster comps and average unit volumes. Moreover, to improve the perception of value and drive sales, particularly at the premium end, Burger King is remodeling its restaurants to give an up-market feel.
Besides McDonald's, Burger King faces intense competition from Yum! Brands, Inc. (YUM) and Wendy's/Arby's Group, Inc. (WEN).
As of March 31, 2010, Miami-based Burger King owned or franchised 12,115 restaurants in 74 countries and U.S. territories. Almost 90% of Burger King restaurants are franchised.
