The WSJ reported this week that McDonalds would more or less elbow its way into Starbucks' turf byopening coffee bars in its 14,000 restaurants.  One of the first changes?  Sizes will be called small, medium and large, not grande, massimo and venti.  The threat posed by McDonalds, with its name recognition and ubiquitous presence, would make any purveyor nervous.  But the threat returns us to a subject we broached on Christmas, the relationship between social responsibility and profit maximization.

Starbucks is not an experience, it is a commodity (or in the words of one commentator, "the coffee chain has evolved into more of a filling station.").  The Seattle based company makes a good latte.  But as the WSJ noted, 80% of its products are not consumed on the premises.  Many of the ventis go out the drive up window.  As a commodity, it will likely suffer disproportionately at the hands of McDonalds.  Assuming the fast food chain can master a coffee machine (and its already had practice making cappuccinos in Europe), plenty of people will belly up for a latte from McDonalds if more convenient or cheaper than at Starbucks.

Such is competition.  But one can't help but wonder whether Starbucks could have learned a lesson or two from Chipotle (which, ironically, was majority owned by McDonalds until recently).  Step inside a Chipotle (a food chain started here in Denver) if there is one nearby.  It's not a commodity but an experience.  The stark decor is full of references to Chipotle's efforts to serve naturally raised meat and organic ingredients and operate in an environmentally conscious manner, from the napkins (made without bleach and 90% from post-consumer recycled paper) to the board on the wall admonishing patrons to "eat responsibly" to the story on the paper cup (about Wes Jackson who is working on sustainable agriculture).  Somehow paying the extra dollar for the burrito at Chipotle seems like an act of community service.  If McDonalds were to insert into its 14,000 restaurants a burrito bar, I'm guessing that Chipotle would withstand the foray nicely.

What's it like inside a Starbucks?  Don't go there for the free Internet.  Unlike many other coffee shops, the Internet is not gratis.  

Social responsibility?  Its hard to tell from the inside.  A quick glance around the couple I visited this week saw no signs of Fair Trade coffee coffee or indications of the environmental benefits of drinking a Starbucks product.  Amidst the product sales and coffee bags was a sign over the Ethos bottled water stating that a purchase of that product (as opposed to all of the other products) would somehow be beneficial.

The Company'sWeb site indicates a number of socially responsible initiates, including large annual purchases of fair trade coffee and some green programs that, among other things, lists the payment of ten cents to patrons who reuse their cups as one of them.  But when Starbucks raises the price of a latte, even modestly,as it did this summer, there is no sense of accomplishment, no sense that the extra change is going anywhere except back into the corporate coffers.  As a result, shifting to McDonalds does not seem like a socially irresponsible act. 

What should Starbucks do?  Profit maximize but take a page from Chipotle.  Pick some socially responsible goals that are easy to grasp and consistent with the consumers who regularly frequent the coffee shops.  Each latte drinker should know that some benefit flows from the purchase, perhaps because a notation on the cup tells them.  To the extent that these goals are also consistent with good health, all the better (inNovember 2007 Chipotle announced that it would drop certain products that contained growth hormones).    

If Starbucks can convince its patron that drinking one of its lattes is the socially responsible thing to do, it will have little difficult weathering the challenge posed by McDonalds.  Said another way, the right kind of social responsibility can be very good for business.  And, its time to make the Internet free.