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McDonald's makes another run at Starbucks

This post is part of the On the Margin blog.

McDonald’s Corp. is making another run at the coffee business.

The Oak Brook, Ill.-based giant is planning a big push to improve its McCafé brand, with enhancements to its beverage lineup and a planned beverage promotion in a move first reported by Bloomberg and confirmed by the company.

As part of the effort, McDonald’s is also requiring operators to install new $12,000 machines to improve the quality of its McCafé beverages. The new machine, according to Bloomberg, can create a wider variety of drinks.

“We are recommitting to McCafé in 2017 by reinvigorating excitement around our McCafé beverages,” spokeswoman Becca Hary said in an email statement.

The company is improving its beverage lineup and will focus on sustainably sourcing its espresso and coffee beans. It is also planning a rewards program through its mobile app and will train workers to deliver the drinks.

The big deal will be a promotion next year, offering $1 coffee and $2 small specialty coffees for a limited time, including lattes and mochas.

McDonald’s has been eager to compete with Starbucks and Dunkin’ Donuts for some time — the chain opened coffee shops in Australia in the 1990s and opened one in Chicago in 2001. It started pushing its McCafé line of beverages in the U.S. in 2007, ultimately requiring operators to add espresso machines to sell lattes and mochas.

Yet the chain has struggled to generate positive sales and traffic in recent years, and the beverage line outside of coffee hasn’t generated the strength the company had hoped.

Beverages remain a strong source of sales and traffic at many chains. Starbucks routinely generates strong same-store sales, and its domestic growth has been so strong it is now the second largest U.S. restaurant chain, after McDonald’s, according to the NRN Top 100.

McDonald’s believes it can offer these drinks because they naturally follow the company’s strong breakfast platform as well as its coffee.

The question, of course, is whether McDonald’s customers actually want an expansion of the drink platform.

Consumers generally consider McDonald’s for its speed, price and convenience and have traditionally shunned the company’s higher-end products, be they espresso drinks or burgers or chicken wings.

That said, McDonald’s is aggressively working to change that perception and become, in the words of CEO Steve Easterbrook, a “modern, progressive burger company.”

It is testing fresh beef. It removed antibiotics from chicken. And it’s trying out table service and kiosks in many markets.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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