Starbucks: Half Empty or Half Full?

OK, so you think you understand this business.

Twelve thousand coffee shops dotting the urban and suburban landscape. Great coffee from exotic places jazzed up into $3 and $4 premium drinks, and unlimited variations of lattes and cappuccinos delivered on pennies' worth of ingredients.

That's a pretty fair take on this growing $8 billion company.

But looking at Starbucks (SBUX Quote) as a place to get good coffee is, well, like looking at a Ferrari as a form of transportation.

It's accurate, perhaps, but it stops well short of the full story.

Those who joined the Starbucks bandwagon in the early days recognized the good coffee, but that's not what they paid 50 to 60 times earnings for. Nope.

Simply stated, Starbucks appeals to millions of Americans -- young and old and from all walks of educational and occupational life -- who are looking for a hangout, for a place to work, meet friends, do business or recharge batteries.

In short, Starbucks has replaced the corner bar.

Today I see headlines about McDonald's (MCD Quote) "assault" on Starbucks' premium coffee hegemony. The fast-food giant now has good coffee, delivered cheaply with assembly-line convenience.

Would I worry as a Starbucks shareholder? Heck no.

The lesson again is that it's not just the coffee. Starbucks President and CEO Jim Donald doesn't worry either, and he recently dismissed McDonald's initiative as only helping Starbucks.

Click here for the video version of this story from Jennifer Openshaw.