McDonald's Expands Coffee Business | Junk Food Blog

08 January, 2008

McDonald's Expands Coffee Business

McDonald's CoffeeReuters reported today that McDonald's is looking to expand its coffee sales by offering cappuccinos, lattes and other drinks, hoping to cash in an additional $1 billion to its sales.

The fast-food chain is already offering espresso-based drinks in 800 of its stores across the USA. McDonald's has 14,000 locations in the USA, compared to 10,700 Starbucks locations in the USA, and 5,300 Dunkin' Donuts locations in the USA.

Dunkin' Donuts lays claim to the most coffee sales in the USA.

So certainly, McDonald's is in a position to lay some hurt on Starbucks and Dunkin' Donuts.

However, Starbucks is pretty safe the way I see it. People go there for the in-store experience, their coffee is secondary.

Dunkin' Donuts, on the other hand, is a different story. People typically just drive up, get a coffee and a maple bar, and they're on their way. No one goes to a Dunkin' Donuts for the in-store experience.

The same holds true for McDonalds.

McDonalds is seeing its core-competency reduced to its Big Mac. It tried to reposition itself as a health-food chain with its Premium Salads line, but instead just farted. On top of that, their McGriddles lineup failed to generate any staying power in the fast-food breakfast phenomenon.

Even though the company is still making a lot of money from these products, they've lost branding power. Today, McDonald's is not known for much more than its Big Mac and Egg McMuffin. And if that's all the company has, it's going to get pushed out of the market.

The coffee market is a very cheap and easy way to create some new customers. If they're just going to sell the "garden variety" coffees, capuccinos, and lattes, they'll do really well. But they'll never compete against the Starbucks of the world. Even if they sell gourmet-quality stuff, people will still regard them as McDonald's and treat them as such.


Anonymous said...

Dunkin' Donuts will kill them.
McD's will never match the coffee at DD's. Their new "gourmet" drip coffee tastes awful and the "latte" they will serve is a powdered mix (their McCafe shops on which the new iniative is based already serves the coffee line).

DD is already doing it at a high level. I cannot see McD's competing except in markets where there aren;'t any DDs....yet,

Cakespy on 1/08/2008 08:00:00 PM said...

hmmm...not sure how I feel about this.

Curly Glamour Girlie on 1/09/2008 05:16:00 AM said...

This is always where established businesses screw up. They try to break into other areas where other businesses have conquered. McDonald's shouldn't be doing "gourmet coffee", just as Dunkin Donuts hash browns are unexplicably hideous due to some wacky mystery spice in there.

I also think there's people who prefer McD's coffee and people who prefer the D&D coffee and no marketing or new products will change those customers' minds.

HugoNovalesC on 1/10/2008 11:34:00 AM said...

McDonald's restaurants in Latin America have an annex (is that a word?) called McCafé, that serves premium coffee drinks. The lay out, decoration, uniforms, tables, and everything in the store resembles that of a coffee shop like Starbucks, nothing at all like McD's.

Kratzy on 6/06/2008 11:05:00 PM said...

Nearly every McDonalds here in Australia has a McCafe attached to it. The food is more like a Starbucks and the uniforms are different, but under the same roof. They market it as an option for Mum while the kids eat their McDonalds. It is quite popular. It is espresso coffee - the only poweders are used in the cold frappe type drinks.

Tracey Beaney on 7/09/2008 02:27:00 AM said...

Great book about setting up a coffee shop business that will make you money from the start - Don Clarke’s practical and illustrated book "How to set up a coffee shop".

Joe on 3/27/2009 12:42:00 PM said...

McDonald's is smart for adapting high-end coffee to a slow economy, but still, their McCafe coffees aren't a whole lot less than Starbucks

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