Reuters reported today that McDonald's is looking to expand its coffee sales by offering cappuccinos, lattes and other drinks, hoping to cash in an additional $1 billion to its sales.
The fast-food chain is already offering espresso-based drinks in 800 of its stores across the USA. McDonald's has 14,000 locations in the USA, compared to 10,700 Starbucks locations in the USA, and 5,300 Dunkin' Donuts locations in the USA.
Dunkin' Donuts lays claim to the most coffee sales in the USA.
So certainly, McDonald's is in a position to lay some hurt on Starbucks and Dunkin' Donuts.
However, Starbucks is pretty safe the way I see it. People go there for the in-store experience, their coffee is secondary.
Dunkin' Donuts, on the other hand, is a different story. People typically just drive up, get a coffee and a maple bar, and they're on their way. No one goes to a Dunkin' Donuts for the in-store experience.
The same holds true for McDonalds.
McDonalds is seeing its core-competency reduced to its Big Mac. It tried to reposition itself as a health-food chain with its Premium Salads line, but instead just farted. On top of that, their McGriddles lineup failed to generate any staying power in the fast-food breakfast phenomenon.
Even though the company is still making a lot of money from these products, they've lost branding power. Today, McDonald's is not known for much more than its Big Mac and Egg McMuffin. And if that's all the company has, it's going to get pushed out of the market.
The coffee market is a very cheap and easy way to create some new customers. If they're just going to sell the "garden variety" coffees, capuccinos, and lattes, they'll do really well. But they'll never compete against the Starbucks of the world. Even if they sell gourmet-quality stuff, people will still regard them as McDonald's and treat them as such.
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