McDonald’s is taking its coffee war with Starbucks straight to your kitchen

November 1, 2013 Leave a comment

McDonald’s is taking its coffee war with Starbucks straight to your kitchen

By Roberto A. Ferdman @robferdman 11 hours ago

McDonald’s has high hopes that the coffee it farms out at drive-thru windows can thrive in your home. McDonald’s and Kraft Foods are planning to test McCafe-branded coffee at grocery and retail stores across the US starting in 2014, Reuters reports. The companies intend to sell three coffee products in stores next year: packages of whole coffee beans, packages of ground coffee beans, and McCafe “single-cups,” much like the K-cups made popular by Green Mountain Coffee Roasters. Kraft will be in charge of marketing and distributing McDonald’s new coffee offerings.The company has been working tirelessly to popularize its budding McCafe brand. It recently moved to use the logo on hot drinks and small carry-out bags for baked items as a means of boosting awareness of the brand. Its in-store coffee sales have already been risen sharply in recent years. Some analysts think the company’s coffee play masks slowdowns in its core business of burgers and fries. With coffee consumption is soaring in the US, it’s a fairly intuitive move.

The move into packaged coffee in grocery stores, however, is slightly riskier. The packaged coffee market has bloomed into a near $6 billion dollar business in the US. But home-brewed coffee is a departure from the fast food playbook of competitors like Burger King and Wendy’s, which have yet to branch into branded home products. The move puts McDonald’s more in line with the strategies of coffee mavens like Dunkin’ Donuts’ and Starbucks—presumably at a more competitive price.

That said, this isn’t the first challenge to Starbucks and Dunkin’ Donuts by McDonald’s, which has long been battling the food chains for breakfast supremacy. Starbucks, which once exclusively sold coffee, has moved into all kinds of food and drink, including breakfast sandwiches, oatmeal and ready-made snacks. For its part, McDonald’s, which once sold coffee as an afterthought, has transitioned into the market for fancier coffee offerings like mochas and lattes. McDonald’s has gone so far as to announce plans for a coffee-focused chain with as many as 150 outlets called McCafe in India, a thriving market for Starbucks.

McDonald’s has a decent shot at luring away stalwart Starbucks customers; coffee drinkers are reputed to be rather fickle about their allegiances.

 

McDonald’s and Kraft to test grocery coffee sales in 2014

Wed, Oct 30 2013

By Phil Wahba and Lisa Baertlein

(Reuters) – McDonald’s Corp (MCD.N: Quote, Profile,Research, Stock Buzz) and Kraft Foods Group Inc (KRFT.O: Quote, Profile, Research, Stock Buzz) plan in 2014 to test sales of McCafe-branded packaged coffees at grocery stores and other retail locations in multiple U.S. markets, the companies said on Wednesday.

The tests will include packages of whole bean and ground coffee as well as “single-cup” options, which typically include K-cups for Green Mountain Coffee Roasters’ (GMCR.O: Quote, Profile, Research, Stock Buzz) popular Keurig brewer. Test markets and pricing were not disclosed.

“We want to work with McDonald’s to help consumers enjoy McCafe premium coffee in the comfort and convenience of their own homes,” Kraft Foods CEO Tony Vernon told analysts on a conference call, disclosing the test for the first time. Kraft will handle the marketing and distribution of the McDonald’s brand coffee.

McDonald’s said in a statement it was “building on the momentum of our McCafe beverages in our restaurants by expanding these options.”

Sales at McDonald’s have gotten a big boost from its introduction of McCafe beverages, which include coffee and espresso drinks like those popularized by Starbucks Corp (SBUX.O: Quote, Profile, Research, Stock Buzz). Coffee chains such as Starbucks and Dunkin’ Donuts sell packaged coffee and K-cups through their shops and other retailers.

McDonald’s last year starting selling packaged coffee at some of its Canadian restaurants.

Kraft got back into the U.S. premium grocery coffee business in August 2011, with a deal to sell Gevalia coffee in supermarkets. Vernon said on the call Gevalia sales have exceeded company expectations.

Kraft had a contentious split with Starbucks in March 2011. Starbucks on Wednesday said it expected to resolve its dispute before the end of calendar 2013.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment