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Report: McDonald’s Specialty Coffee Sales ‘Tepid’

May 13th, 2008 @ 10:59 am

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Tags: McDonald's Corp., Starbucks Corp., Beverage, Food & Beverage, Sales Strategy, Manufacturing, Sales, Dan Mitchell

In January, Chris Dannen predicted on Fast Company magazine’s blog that McDonald’s would me “maimed” by its attempt to take on Starbucks by offering a new line of specialty coffees. The new drinks will have “little more than the potential to alienate customers, confuse its menu and open up a black hole for capital,” he warned.

Now, Crain’s Chicago Business has obtained internal company documents showing that Mr. Dannen may have been right. According to Crain’s, sales “remain tepid” in the two test markets – Michigan and Kansas City — where McDonald’s has been gauging consumer interest before going ahead with plans to introduce the drinks in all of its 14,000 U.S. locations this year.

At an average of 300 sales per store, “the unit sales appear to be well below the number needed to reach McDonald’s goal of adding $125,000 in annual revenue per restaurant, or about $1.5 billion companywide,” Crain’s reported. At a hypothetical $3 per sale, the results indicate that each store would see less than $50,000 per year.

Other specialty drinks such as teas and smoothies are part of the plan, but the coffee drinks being test marketed, which include lattes and cappuccinos, are the heart of McDonald’s strategy.

It may be too early to bag the idea based on the results so far, but it also may be that Mr. Dannen was right when he noted the odd disparity between McDonald’s core identity as a purveyor of fat, sugar and grease and its wish to take on the somewhat effete image of Starbucks. “With hamburgers and fries, you drink cold soda,” he wrote. “So it is written, and so it will stay.”

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Dan Mitchell

Dan Mitchell has spent the past 20 years writing and editing for newspapers, magazines, and Web publications. Currently, he writes the What's Online column for the Saturday business section of the New York Times. He has also written for the Chicago Tribune, the Minneapolis Star-Tribune, National Public Radio, Business 2.0, and Wired. more »

AboutFood Industry

BNET Food provides daily industry news coverage and insights for managers and executives, focusing on the major companies in the food and beverage sector, from manufacturers to retailers. In addition to detailed company profiles, we bring you critical analysis on new alliances and partnerships, new products, mergers and acquisitions, labor and cost management, investments and deal flow, and a host of other important business issues.

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