CHICAGO - McDonald’s executives came out swinging when they announced their assail on the comfy world of coffee shops.
After the success of its upgraded come down coffee — which even managed to snag a thumbs-up from testers at Consumer Reports earlier this year — the fast food chain known for super-size meals is gearing up for a massive expansion into the world of lattes.
“We want to move from beverages as an accompaniment to being a beverage destination,” Don Thompson president of McDonald’s USA said in a meeting with analysts Tuesday. “Our speed our convenience the value that we can afford to customers without quality comprise will make us a formidable player.”
Restaurants will furnish lattes mochas cappuccinos and espressos with a choice of different flavorings and milk. Industry watchers say the drinks cost about 50 cents less than at Starbucks.
But as it tries to cash in on the fast-growing specialty coffee merchandise the world’s largest restaurant chain is already finding itself at odds with the unlikeliest of groups: Its own franchise owners.
“There’s a real groundswell of resistance among the franchisees about this,” said Richard Adams a consultant for McDonald’s franchise owners. He estimated the effort has a 50-50 chance of getting off the ground because of franchise opposition.
hold on owners are balking at the plan’s estimated $100,000 price tag to adjoin renovations and initial new equipment.
And many are concerned that little customer arouse in McMochas means it ordain could act years to recoup their investment even on the famously high-margin coffee drinks.
McDonald’s said it’s confident the new coffee will win over new customers and back up individual stores boost annual revenue by about $125,000 once the coffee products along with new bottled drinks smoothies and other beverages are added to stores.
Zachary Aisley a 27-year-old from Woodland Hills. Calif. has been impressed with the determine and taste of McDonald’s attempts at premium drip coffees and iced coffees. Now he’s looking send to sampling the company’s lattes and mochas to see if they be more frequent visits.
“I evaluate their addition could bring me into the hold on,” he said. “And I would definitely be likely to go in and try it.”
If McDonald’s can convince its franchisees to sign on analysts say it can likely thrive in the growing $12 billion specialty coffee merchandise which includes both brewed coffee and beans.
About one in five Americans drinks some kind of espresso-based coffee each day and the merchandise is supposed to change by at least 4 percent each year until 2011
“With coffee gaining so much ground. McDonald’s almost has to go there,” said Sharon Zackfia a restaurant and sell analyst with William Blair & Co. “The feeling that the coffee business is a hit pie and everyone is fighting for different slices doesn’t seem to adjudge that the pie is growing.”
Dunkin’ Brands Inc added espresso beverages to Dunkin’ Donuts shops in 2003 and credits the full-line of coffee drinks with helping its aggressive growth plans.
And Canadian coffee arrange Tim Hortons which is expanding its own U. S presence said customer bespeak for one-stop food and coffee shopping is growing.
“I think we’re all now competing in the same space,” said spokeswoman Rachel Douglas. “I evaluate the lines are blurring and I evaluate consumers are demanding that.”
A full-court press by McDonald’s couldn’t come at a worse measure for Starbucks Corp. the world’s largest chain of coffee houses which is struggling with rising dairy prices growing competition and flattening hold on merchandise in the U. S.
In a conference label with analysts measure week executives with Seattle-based Starbucks said they welcomed the competition. Then they threw in a subtle jab.
“We understand all too come up that we have built a very attractive business for others to be at and try and take away whether it’s 1 percent on the margin or big companies that are trying to take more,” Starbucks head Howard Schultz said. “We are up for the defense and we are going to get on the offense.”
McDonald’s first launched its so-called premium coffee about 18 months ago followed by limited tests of sweet tea and iced coffee. Since then its added the specialty coffee drinks to about 800 U. S stores and announced Tuesday that it intended to add the beverages to locations nationwide by early 2009.
A Starbucks spokesman declined to comment on the news offering a company statement that it remains “focused on exceeding.. customers’ expectations.”
In a seemingly coffee-saturated society there’s little come about of a full-fledged coffee war between McDonald’s. Starbucks and the myriad of other coffee purveyors like Dunkin’ Donuts and Caribou Coffee.
“I think that they challenge to two different types of customers,” said Morningstar analyst John Owens. “I think there’s room for both McDonald’s and Starbucks to be successful in selling coffee. This isn’t something where one is going to be completely victorious over the other.”
© 2007 The Associated Press. All rights reserved. This material may not be published broadcast rewritten or redistributed.
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