McDonald's aims for specialty coffee market share
LOS ANGELES, March 21 (Reuters) - McDonald's Corp. (MCD.N) said it expects to take market share from U.S. specialty coffee retailers as it prepares to expand its offerings of lattes, cappuccinos and iced coffees.
At an investor conference in Las Vegas on Wednesday, McDonald's USA President Don Thompson was asked specifically if McDonald's expected to take share from No. 1 coffee shop chain Starbucks Corp. (SBUX.O)
"We expect to take some share out of the specialty coffee marketplace," Thompson said at the J.P. Morgan Gaming, Lodging and Restaurants Conference. "Wherever that comes from is wherever it comes from."
Last year, McDonald's introduced a new, stronger coffee blend to its U.S. restaurants as it looked to increase breakfast sales. The move was a resounding success, and the hamburger chain is now testing flavored iced coffees, espresso drinks and sweet tea in thousands of restaurants.
"You can't get much better profit than adding water to beans," Thompson said. "It is a great margin business."
Breakfast is McDonald's most profitable time of day, Thompson added.
In addition to McDonald's, Dunkin' Donuts and many others in the fast-food industry have been upgrading their coffee offerings in a bid to capture more morning sales. Those moves have translated into stiffer competition for rival Starbucks.
Recently, McDonald's began offering to add cream and sugar to the brewed coffee served in its restaurants -- a contrast to Starbucks, where customers add their own at milk and sugar stations in the stores.
In addition to coffee, McDonald's is also testing bottled beverages such as energy drinks and iced teas in a number of U.S. restaurants. Thompson said the challenge with that business would be to preserve the robust profit margins it enjoys with fountain soft drinks.
Looking to food, Thompson said the company is testing a southern-style chicken sandwich and chicken breakfast biscuit. It plans to introduce a southwestern-style salad to all its U.S. restaurants this spring.
((Reporting by Nichola Groom; Reuters Messaging: nichola.groom.reuters.com@reuters.net, Tel:+1-213-955-6755; editing by Jane Baird)) Keywords: MCDONALDS COFFEE/
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