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Some of the concerns we talked about Starbucks several months ago are continuing to go on unaddressed, as it looks like they're increasingly looked upon as not much above a fast-food business. At that time we talked about them being in danger of being commoditized. That idea looks like it could become a reality.

In the case of their competitor McDonalds, according to the Consumer Reports magazine, not only is the coffee cheaper - it's better! That's definitely a problem for Starbucks.

Deutsche Bank Securities Inc. analyst Marc Greenberg wrote in a note: "The coffeehouse is facing a new world order. McDonald's is the very last company we would choose as competition."

In a report on Friday, McDonald's (MCD) said they experienced the highest rise in sales in three years. They are now offering an array of beverages that compete directly with Starbucks (SBUX). This could definitely impact Starbucks share price, as Greenberg cut his target price by 14 percent to $32 from $37.

Spokesman for Starbucks, Brandon Borrman said about the company, that they are focusing on giving their customers "a unique combination of premium coffee and an exceptional experience that they can get nowhere else."

While these are exactly the right words to say, it doesn't seem that they are being lived up to.
 
For example, what does Paul McCartney releasing his music within the Starbucks store have anything to do the "unique combination of premium coffee and an exceptional experience"? What about creating a music label? Is that connected to the same as well?

If Starbucks wants to try out a few things, that's all well and good, it just can't be done at the cost of losing its core vision. If McDonalds can compete with them there, they are really in trouble. They have to answer the question of why consumers would be willing to drop them for McDonalds if their experience is that unique; and they have to answer it correctly.