2/28/2005 10:06:00 AM|||Scott Lewis|||McDonald's is testing high-end coffee in restaurants, and analysts say it's a matter of time before that company and other U.S. fast-food chains start offering a better brew.
Profits on specialty coffee, a nearly $9 billion a year retail market in the U.S., are too large for the chains to ignore.
Test Results Positive So Far
"McDonald's is testing premium-quality coffee in select markets across the U.S. and we're giving customers an opportunity to say what they think," said Bill Whitman, spokesman for McDonald's in Oak Brook, Ill. "We haven't set a date for a national rollout. We continue to learn from the tests, and results so far have been positive."
The company's coffee sales have risen in recent years, "and it's not just people coming in for breakfast coffee anymore - they're coming in throughout the day," Whitman observed. "We serve 23 million U.S. customers each day and want to meet their needs at a value price. We're interested in competing with ourselves, not other companies."
Jack Russo, beverage analyst at A.G. Edwards in St. Louis, said McDonald's is trying to upgrade some of its current menu offerings. "They're looking at what they can do better, and coffee is one of those items. They're not going to try to compete with Starbucks."
McDonald's began testing a specialty brew in the U.S. with the opening of a McCafe coffee shop in downtown Chicago four years ago. Before that, the company had already launched hundreds of McCafes in Australia, Europe and elsewhere. In 2005, the company operates McCafe shops at its Oak Brook, Ill., headquarters, along with four in North Carolina.
McDonald's doesn't release annual sales for coffee or other menu items, the company said.
Profits, Restaurant Traffic To Increase
"Specialty coffee is a great opportunity for the fast-food chains, and whoever gets in first stands to gain the most," said Tom Pirko, president of BevMark, California-based consultants to the food and beverage industry. "It looks as if McDonald's will be the first in the U.S. to jump in."
McDonald's already makes a good profit on its milkshakes and can do the same on specialty coffee, he said. "The industry has found out that people will spend four times as much for a cup of premium coffee as a regular cup. Donut chains are offering high-end coffee and I'm surprised the fast-food chains haven't done it sooner."
Dunkin' Donuts, which is a unit of Allied Domexq PLC, Krispy Kreme Doughnuts, Exxon Mobil gas stations and 7-Eleven stores are all cashing in on demand for a premium brew.
"Specialty coffee will bring more traffic to McDonald's and the fast-food chains, partly by bringing more young people into their restaurants," Pirko said. "Fast-food restaurants have a problem with boring menus, and the key with coffee will be to deliver an interesting, superior product. They could really do well with an iced, gourmet coffee product in the summertime."
Fast-food chains are upgrading their sandwiches and offering salads, and applying what they've learned there to other products, Pirko observed. Those companies may eventually look at high-end teas too, he said. Tea shops are starting to do well in the U.S. and Stabucks offers tea in addition to coffee.
Jump|||110986615919518965|||McDonald's Mulls Switch to Gourmet Coffee3/05/2005 10:13 AM|||Chris Filipek|||mc donalds latte? mc mocha?
gourmet coffee is best left to those that build their reputation around quality of goods and service...not those who are famed for quick drive-thru time and cheap burgers. i can just picture it now, some fool who never drinks espresso themselves is suddenly a barista because management baught a new coffee machine. basically, if one knows and apreciates espresso, one will go where they can attain such brew, and that most certainly will never be a quick-service food establishment. its just how things work in this world. it is not economically feasible for fast-food establishments to create a quality coffee drink. its more than just forking out a few grand for a decent brewing machine, its also the time spent training a barista and ensuring consistently acceptable product quality...something that comes more easily when your product quality is accepted as minimal.
To help you understand the complex yet predictable nature of the free market you could read 'the wealth of nations' or...just think of why uncle bob's used car lot doesnt sell new porsches, not even one. Now think why mc donalds doesnt serve espresso. uncle bob could sell a porsche, but it will have to be a 1980s 944 because thats the cheapest porsche you can get. mc donalds could sell a coffee, but it would be some poorly brewed, standard fast-food, tastes-like-plastic, comes-in-a-styrafoam-cup kinda' junk. the stuff construction workers drink at 6am to wake up. not espresso. could mc donalds employees even spell or pronounce espresso? i know not.