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Starbucks may lose coffee drinkers to McDonald's

Starbucks Corp., the world's largest chain of coffee shops, may see sales slow as people increasingly turn to McDonald's Corp. for their daily brew, a Deutsche Bank Securities Inc. analyst said.

Marc Greenberg, who is based in New York, cut his target price for Starbucks shares by 14 percent to $32 from $37. He said McDonald's switch to a new coffee blend last year has improved its reputation among consumers.

"The coffeehouse is facing a new world order," Greenberg wrote in a note late Friday. McDonald's is "the very last company we would choose as competition" for Starbucks.

McDonald's, which reported monthly sales today that rose the most in three years, is selling iced coffee and other specialty brews at some U.S. stores. In February, Consumer Reports magazine ranked McDonald's coffee ahead of Starbucks, saying it tastes better and costs less.

McDonald's coffee has "surprisingly high" appeal, with 35 percent of consumers surveyed by the bank saying McDonald's brew got better in the past year, Greenberg said.

Starbucks spokesman Brandon Borrman declined to comment on the analyst's note.

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