Peep Insights: The Latest in the Coffee Wars

Peep Insights: The Latest in the Coffee Wars
Dan Gould
  • 11 may 2009

Last Wednesday was National Beverage Day, a little-known holiday that inspired us to examine the new McCafé coffee line, from McDonalds.

Perhaps an unlikely chain vying for a piece of the caffeinated pie, but with this week’s launch, McDonald’s introduced an expanded McCafé coffee line, featuring cappuccinos, mochas and lattes. The specialty offerings are available at 11,000 locations (out of 14,000) nationwide. And taking a page from the coffeehouse playbook, McDonald’s customers can customize any drink with flavored syrups, steamed milk or whipped cream.

While Starbucks battles the stigma of the recession-unfriendly “4 dollar coffee,” a coffee run at McDonald’s will set you back $2.19 for vanilla cappuccino and $2.29 for a mocha (12 ounce).  McDonald’s hopes the affordable coffee menu will generate $1 billion in sales this year.  Not that the fast food giant is hurting for cash in the economic downturn – as people look for cheaper eating-out options, McDonald’s posted a 5% gain in U.S. in November of last year and has continued to grow.  Same-store sales rose 2.8% from December to February.

Meanwhile, Starbucks is closing stores (900 since last summer), laying off employees (12,000 in 2008) and trying to slow same-store sales (down 8% in the second quarter).

Some argue increased coffee competition will only generate more customers. To be safe, McDonald’s will promote the McCafé line with a multimedia $100 million ad campaign and various online sweepstakes.  The ads and the contests all encourage Americans to “McCafé their day.”  For nearly a dollar less a drink on average than bigger coffeehouse chains, many just may.

Contributed by Bridget Lee


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