• Seattle Times, Friday, November 6, 2009 12:15 PM

Starbucks' Seattle's Best Coffee brand will be in 9,000 Subway stores in the U.S. by the end of this year, Starbucks CEO Howard Schultz told analysts yesterday, reversing the company's long-held distaste for fast-food eateries, Melissa Allison and Amy Martinez report.

"Candidly, given the fact that fast-food players have gone after the breakfast business -- specifically McDonald's -- in such a big way, and made such a big push into coffee, their core competitors want to compete directly with them in that space," Schultz said in a call discussing quarterly results. (Sales down 4%; profit better than expected due to cost-cutting.)

In the past, the company turned down McDonald's as a partner, an alliance that Morningstar restaurant analyst R.J. Hottovy feels would have been stronger. But he also says that the company is wise to tip-toe into fast food with SBC, which CEO Schultz says is in the infant stages" of what it could become.

"It's a way of expanding in the U.S. without diluting the Starbucks brand," Hottovy says, "and Subway is probably just as excited to have a relatively well-known brand name partnering with them as well."

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