Just days after Starbucks CEO Howard Schultz announced a leadership shakeup at the world’s biggest coffee chain, McDonald’s says it’s going to overhaul its McCafé concept to better challenge Starbucks and Dunkin’ Donuts.
A revamped McCafé is no surprise. While sales at coffee chains grew 10% last year, coffee sales at fast food outlets like McCafé grew only 3%.
In an attempt to share in some of that growth, McDonald’s is promoting new McCafé deals and pushing harder on its rewards program in addition to offering more seasonal drinks. The fast food coffee brand is also highlighting sustainability and its menu-wide coffee bean sustainability program.
Alongside more seasonal flavored lattes and coffee drinks, another area where customers might expect to see changes is in McCafé’s cold beverage options. Brands, from Dunkin’ Donuts to Dr Pepper to Starbucks, have all stepped up their cold brew coffee offerings, made with cold water as opposed to iced coffee, which is hot-brewed coffee then cooled down.
Starbucks’ commitment to cold brew came this last summer after the brand saw an unexpected 20% increase in US cold coffee drink sales.
In May 2016, Starbucks introduced a North America line-up of cold coffee drinks with bullish projections that it expected “the category of cold coffee to double in the next three years.”
In September, Coca-Cola also announced that its Gold Peak iced tea brand would be launching cold brew coffee offerings.
Currently, McCafé offers iced coffee to McDonald’s customers along with a variety of blended frappé drinks. But so far, McDonald’s has avoided the cold brew bandwagon—perhaps to its detriment.
The possibility of an expanded cold drinks menu is not all McCafé is doing to reintroduce its $4 billion brand. They will also expand espresso options, requiring new equipment be acquired by franchisees. One airline will also exclusively serve McCafé drinks, with Canada’s WestJet announcing last month that it’s adding McCafé to its in-flight menu.
Oddly enough, McCafé lagging behind the coffee culture curve is a US-specific phenomenon for McDonald’s. In the Asia-Pacific region, McCafé has worked hard to be innovative on the coffee front.
While McDonald’s was compelled to de-brand its coffee chain in java-fussy Australia to play down down its parental roots, McCafé outposts in Hong Kong celebrated latte art and whole bean packaging that would fit in almost any hipster cafe.
In keeping with how McDonald’s tests its innovations outside the US, such as its DIY digital kiosks, the first-ever McCafé was tested in 1993 in Canada.
As McDonald’s steps up its coffee game, analysts say Starbucks should be worried—and they’re right. With better marketing for its coffee sourcing and cut-rate pricing on specialty espresso drinks, Starbucks could lose market share to McDonald’s. But Starbucks is countering by going the other direction.
So while Howard Schultz is stepping down as CEO, the Starbucks guru is stepping up his commitment to Starbucks’ roots as a coffee connoisseur. He plans to throw himself into scaling the Starbucks Reserve Roastery brand, a premium concept that adds artisanal methods and high-touch elements —see the Tasting Room part of its moniker—to appeal to the hardcore or aspiring coffee aficionado.
Done strategically and thoughtfully, it should help take Starbucks more upscale, leaving McCafé to battle it out with Dunkin’ Donuts and other lower-priced players.
This article first appeared in www.brandchannel.com
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