McDonald's Eyes Bigger Share of Coffee Market

Created: 11/14/2013 4:56 PM KSTP.com By: Megan Stewart

In this Friday, Oct. 4, 2013, photo, a McDonald's restaurant sign is seen at a McDonald's restaurant in Chicago.
In this Friday, Oct. 4, 2013, photo, a McDonald's restaurant sign is seen at a McDonald's restaurant in Chicago.
Photo: Photo: AP/Nam Y. Huh

McDonald's wants to be a bigger player in the global coffee business.
    
The world's biggest hamburger chain on Thursday highlighted beverages as one of its key growth opportunities at a day-long presentation for investors.
    
McDonald's CEO Don Thompson noted that coffee is one of the fastest growing categories in its global drinks business and said that the company has less than its "fair share" of the market. When asked to identify competitors in the space, Thompson chose to keep the discussion broad.
    
"Anyone that stops off to get a cup of coffee anywhere, that's an opportunity," Thompson said.
    
The push comes as Starbucks Corp. is enjoying strong sales growth even in the choppy economy. In the latest quarter, the Seattle-based chain said global sales rose 7 percent at locations open at least a year. At McDonald's, the figure edged up 0.9 percent.
    
As for the coffee servings sold in the U.S. restaurant industry, McDonald's currently has less than 13 percent of the market, said Kevin Newell, the company's chief brand and strategy officer for the region. Still, he noted McDonald's has seen its coffee sales surge 70 percent since the introduction of McCafe specialty coffees in 2009.
    
A big part of the attraction of McDonald's coffee is value; many locations in the U.S. offer a regular drip coffee of any size for $1. But McDonald's wants to get people to buy pricier drinks, too. This fall, the company introduced a pumpkin spice latte following the popularity of similar drinks at Starbucks and Dunkin' Donuts. And next week, McDonald's plans to launch a white chocolate mocha flavored latte.
    
The company, based in Oak Brook, Ill., also recently said it's partnering with Kraft Foods Group Inc. to sell McCafe bagged coffee at supermarkets in test markets. The company is hoping the move will help build awareness of the MCafe brand.
    
"It's about selling more coffee in restaurants," Newell said of the Kraft partnership.
    
It's not clear what impact the push by McDonald's will have on Starbucks. Richard Adams, who runs a consulting firm for McDonald's franchisees, notes that the chain sells plenty of drip coffee and blended ice frappes in the summer but has struggled to sell espresso-based beverages such as lattes.
    
In the meantime, Dunkin' Donuts and Starbucks are trying to boost food sales and attract more customers in the afternoon and evening hours. Starbucks recently revamped its sandwiches and introduced new salads and baked goods to become more of a lunch destination. About a third of purchases in the U.S. include food and Starbucks is looking to push that figure up.
    
But Starbucks CEO Howard Schultz doesn't like comparisons to chains such as McDonald's and Dunkin' Donuts.
    
"They're in another business - they're fast-food," Schultz said in an interview on CNBC earlier this year.
    
Overseas, McDonald's also has about 4,200 separate McCafes that are either sectioned off from the main restaurant or stand-alone locations. McDonald's says it plans to add another 350 to 400 such McCafe locations next year.
    
Still, Thompson stressed that McDonald's remained in the restaurant business.
    
"We're not trying to be something we're not," he said.

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