'Mad Money' Spotlight: Starbucks vs. McCafe

There's a coffee war brewing. (Mmmm ... coffee war.) And according to Jim Cramer during last night's 'Mad Money,' the winner of the early battles is not power-coffeehouse Starbucks(SBUX Quote), but fast foodie McDonald's(MCD Quote).

Indeed, so monumental has McDonald's massive rollout of its McCafe been, Cramer said now is not the time to buy Starbucks.

McDonald's chains, of course, always sold coffee, but the coffee itself had never the focus. Now that McCafe is pushing coffee as a profit center, and not as an after-thought, Cramer says Starbucks stock is not worthy of your bucks.

McCafe now has more than 10,000 locations, compared to 1,000 the same time last year. The company began promoting its espresso drinks on TV, radio, print and outdoor ads in May as part of a $100 million marketing campaign.

McCafe's lower prices also help. In these trying times, few are willing to shell out $4-plus for a triple vente latte.

As a result, McDonald's May same-store sales jumped 5.1%.

Starbucks has embarked on a similar marketing campaign -- and has even toyed with lowering some of its prices. But consumers can't seem to shake the mindset that Starbucks equals a luxury they can't afford right now.

In its first quarter, Starbucks profit plunged 77%, hurt by hefty restructuring charges related to the closure of more than 120 U.S. stores during the period. Same-store sales tumbled 8% both worldwide and in the United States.

The company plans to shutter more than 900 stores and layoff about 6,700 employees.