Starbucks testing sales of 8-oz. cup of coffee for $1

Starbucks is facing competition from Dunkin' Donuts and McDonald's in the premium coffee market. Founder and chairman Howard Schultz said this month the company hasn't introduced enough "exciting" products. (Ted S. Warren/Associated Press/File 2007)

Starbucks Corp., the chain of cafes that charges as much as $2.10 for a black coffee, is seeing if customers will buy $1 cups as it defends against competition from McDonald's Corp.

Starbucks is testing eight-ounce "short" coffees in Seattle-area stores, spokeswoman Bridget Baker said yesterday.

Small cups of premium coffee at McDonald's Corp., Dunkin' Donuts, and other lower-cost competitors typically cost just over $1, according to The Wall Street Journal, which first reported on Starbucks' new program yesterday.

But the company said in a statement e-mailed by Baker that the test "is not indicative of any new business strategy."

Chairman Howard Schultz, who ousted Jim Donald as chief executive of the world's largest chain of coffee shops this month, is facing an increased threat from McDonald's new cappuccinos and lattes. Schultz told employees last year that Starbucks was "watering down" its brand. He told investors Jan. 7 that the company hasn't introduced enough "exciting" products.

The chain now has more than 15,000 stores in 43 countries, about 10,600 of them in the United States.

Dunkin' Donuts, based in Canton, Mass., and a subsidiary of Dunkin' Brands Inc., calls itself "the number one retailer of hot regular coffee by the cup" in the United States; it has 7,200 franchised restaurants in 31 countries.

Starbucks declined in two of the past three years in trading on the Nasdaq Stock Market. The 42 percent drop in 2007 was the steepest since the company went public in 1992. The shares rose $1.42, or 7.6 percent, to $20.09. They dropped 8.8 percent this year before yesterday.

A $1 cup wouldn't disrupt the daily Starbucks ritual of customer Rick Cuozzi. The manager of a home-mortgage office said he buys a 16-ounce cup for $1.87 near his home in High Point, N.C. He pays 53 cents for a refill at a store near his Greensboro office.

"Eight ounces is not enough," Cuozzi said of the quantity Starbucks is testing for $1. "I don't think about the cost. I go there because it is Starbucks."