McDonald’s Foray into Specialty Coffee

     The McCafe. The McDonalds® hamburger empire has for some time been interested in serving espresso based drinks in its stores. This year there has been considerable press concerning the financial impact this venture will have on the specialty coffee industry. Although mainly targeted at Starbucks® the nation’s leading coffee company, the questions still begs to be asked: How will McDonald’s venture into the specialty coffee industry affect your store sales?

      McDonalds has always had a very lucrative morning breakfast rush with coffee accounting for 5% of the ticket. Their coffee has somewhat been palatable to the consumer in a rush to get to the office. But with more and more consumers willing to spend the extra money for a premium coffee, McDonald’s tactics makes for a very good reason to capitalize in this segment of the coffee industry. In a recent interview in the The Atlanta Journal-Constitution columist Leon Stafford asked Don Thompson, president of McDonald’s about their venture into the specialty coffee arena:

Q: McDonald’s is upgrading its coffee products, rolling out more

premium blends. Some have even speculated that McDonald’s could be taking on Starbucks. What are your thoughts?

A: Espresso-based drinks [are] a huge market opportunity. Our efforts in this arena are not focused on any competitor. What they are focused on are our customers and what their drinking habits are. And when you look at the espresso-based drinks, it is a category that is growing tremendously.

   The remaining interview focused mainly on McDonald’s business strategy and relationships with its vendors. It may be to early to gauge the impact that this move will have on smaller coffee shops around the country. But the announcement may have impacted stock market shares for both McDonalds and Starbucks.

      Other analysts and consultants have a different take on McDonald’s move. In an online interview with columnist Kristen Cole for WCBSTV.com Judy Ganes had this to say:

     “For the consumer it’s a win-win,” said coffee consultant Judy Ganes. “There’s better coffee at more locations.”

     Ganes tracks production and pricing of coffee and says Starbucks first poached from McDonalds’ playbook by offering drive-thrus and breakfast and lunch. Now the roles have reversed.

    “McDonalds is hoping this brewing competition will add a billion dollars to its bottom line and is also promising consumers their coffee will cost 60 to 80 cents less,” she said.

     But one thing is for sure, consumer’s will have more choices for its specialty coffee needs. To compete for those choice demands, smaller coffee shops will need to start building a loyal customer base today. When McDonalds roles out en-mass its McCafes, coffee houses will have already established their customer base. As the novelty of the McCafe wears off, this will be one of the best opportunities to fill a void left during and after the Starbucks/McDonalds battle for coffee dominance.

     Creating an atmosphere where your customers want to be is very easy to obtain. Customers want to feel special, make that happen. Get to know your customers by their first name and their choice of coffee. Customers want a quality cup of coffee for the prices they’re paying. Other ways you can build and keep your loyal customer is to educate them to the subtleties of espresso based drink. Today’s connoisseurs are more than eager to take in information about what’s going into the preparation and production of their coffee. Offer your customers loyalty cards for their patronage. It doesn’t have to be a lot, it’s the gesture that makes all the difference. Select a few loyal customers and teach them how to make an espresso based drink. Occasionally offer a class on the nuances of coffee in your store.

     The ideas to build and sustain a customer base are numerous. Acting now will ensure that whenever McDonalds does roll out their national cafes, you will have already secured your niche in this competitive market.