November 12, 2009 / 6:24 PM / 10 years ago

UPDATE 1-Starbucks CEO--McDonald's made Starbucks better

* CEO says McDonald’s McCafe launch was first competitor

* “McDonald’s made us better,” Starbucks CEO says

* Starbucks shares edge down

LOS ANGELES, Nov 12 (Reuters) - Starbucks Corp (SBUX.O) Chief Executive Howard Schultz said McDonald’s Corp’s (MCD.N) McCafe launch earlier this year made the cafe chain better.

Starbucks executives have repeatedly said that the world’s largest hamburger chain’s entry into the market for espresso-based drinks, the first competitive pressure Starbucks had faced in the niche it pioneered, had no impact on Starbucks’ business. But comments beyond that have been few and far between.

“McDonald’s made us better,” Schultz said on Thursday at the Ernst & Young Strategic Growth Forum in Palm Springs, California.

The CEO said the McDonald’s McCafe advertising blitz prompted many coffee drinkers to compare products from the two companies. He said that benefited Starbucks.

Schultz retook the helm at Starbucks in early 2008 and began a restructuring that has involved shuttering roughly 900 stores, slashing other costs and eliminating waste.

Earlier this month, Starbucks raised its financial forecasts for 2010 in the latest sign that a year-long turnaround effort is boosting margins.

“We’re going to start growing the company again,” Schultz said.

Starbucks shares were down 9 cents at $21.62 in early afternoon trading on the Nasdaq. (Reporting by Lisa Baertlein, editing by Gerald E. McCormick)

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