McDonald’s targets Starbucks with McCafe revamp

McDonald’s is looking to build on the success of its all-day breakfast, which rolled out last year across the U.S. It’s also upgrading stores with table service and more touch-screen ordering kiosks. The all-day breakfast push helped fuel a return to growth, but the resurgence has been waning: Domestic comparable sales rose just 1.3 per cent last quarter, and McDonald’s is facing declining foot traffic.

McDonald’s isn’t alone in struggling to build a more sophisticated coffee menu. After Burger King introduced 10 new Seattle’s Best drinks in 2013, including flavoured lattes, the rollout fizzled. The company later merged with Tim Hortons, a Canadian coffee chain, though the two brands remain distinct.

McDonald’s still plans to emphasize its price advantage over Starbucks as it retools the McCafe brand. The company is planning a $1 drip coffee and $2 small specialty-beverage deal for the first quarter of next year, Cunningham said.

The chain, with about 14,000 domestic restaurants, said in October that it would buy all of its coffee from sustainable sources by 2020. In another sign of Starbucks envy, McDonald’s sold pumpkin-spice lattes across all of the U.S. this fall — the first time it’s done so in three years.

The company opened its first stand-alone McCafe location in Toronto last year, a move that it said “showcases the company’s passion for elevating the cafe experience.” McDonald’s now sells Americanos and shots of espresso across its Canadian restaurants. The McCafe locations even bake McCafe pastries in house.

In the U.S., McDonald’s is upgrading its espresso machines with equipment that creates more consistent-tasting drinks, Cunningham said. The new gear, which has better milk-steaming technology and can make a wider variety of drinks, costs about $12,000 apiece.

But the typical McDonald’s diner is a low- to middle-income consumer and not adventurous when it comes to coffee, said Will Slabaugh, analyst at Stephens Inc. Customers are looking for something that’s affordable and familiar, he said.

“It’s going to continue to be a slow build for them, especially in this type of environment where the customer expects a deal,” Slabaugh said. “I don’t expect that to be a huge needle mover for them.”

Article Appeared @https://www.thestar.com/business/2016/12/05/mcdonalds-targets-starbucks-with-mccafe-revamp.html

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