McDonald’s takes McCafé brand into supermarkets

McDonalds is taking its McCafé sub-brand into supermarkets, a move intended to raise the profile of the coffee served in restaurants and tempt drinkers away from Starbucks.

The restaurant is taking its coffee range to supermarkets for the first time.
The restaurant is making its coffee range available in supermarkets for the first time.

The fast food maker’s major foray into the retail sector takes place next year when it rolls out its coffee brand in partnership with Kraft Foods nationwide across the US. It includes the ground and whole bean McCafé coffees as well as single-cup pods that can be used in at-home coffee machines.

Consumers will be able to purchase the bags through grocery and wholesale retailers, while they will also be served at McDonald’s restaurants. The coffee will be sold in several variants including Premium Roast, Breakfast Blend, French Vanilla and Hazelnut with pricing expected to be inline with the $7.29 (£4.38p) used when it was trialled earlier this year.

McDonald began testing the product last year that saw it vie for shelf space in selected stores with the similar grocery store offerings from Dunkin Donuts and Starbucks.

Despite trailing those rivals in the category, McDonald’s move could open a gateway into the lucrative $11.7bn (£7.04bn)-valued US at-home coffee market, according Marketwatch. However, the restaurant is more concerned about using the expanded retail footprint to elevate the profile of the range rather than boosting revenues. Chief executive Don Thompson clarified the plan earlier this year when he said the trials were about marketing and ‘reminding people to come into a McDonald’s restaurant’ rather than boosting revenues.

Greg Watson, senior vice president of US menu innovation at McDonald’s, says: “We understand there is huge demand for at home options and we’ve built great success with our McCafé coffee in restaurants. So, it was a natural next step to provide customers with McCafé coffee to enjoy in their own home.”

McDonald’s sales have been slowing in the US in recent years. Like-for-like sales for the market plummeted for the third month straight in July by 3.2 per cent, contributing to a global 2.5 per cent drop in the period – matching the largest decline in a decade.

But with coffee accounting for more than 6 per cent of sales in the region, the business is backing McCafé products to drive growth through “coffee-driven visits” and its breakfast offering. At an investor conference last year the business revealed coffee sales surged 70 per cent between McCafé’s debut in 2009 and 2013.

McDonald’s did not rule out launching the product in Europe but says “there are no current plans to launch anything similar”. It has a history of testing products such as its iced frappes and fruit smoothies in the US before extending to Europe if they prove popular. The McCafe brand has been hailed as a bright spot in a challenging European market that has seen growth in countries such as the UK offset by ongoing declines in Germany and Russia.

Digital, PR and sampling plans are reportedly being prepped to support the range, which will likely replicate the brand’s long-running premium positioning used in its outlets. The branding was replicated when it piloted the products.

Nina Barton, vice president of coffee for Kraft Foods said the venture with McDonald’s “represents a whole new era in the world of at-home premium coffee”. The tie-up could carve out an opportunity to replace the scale it lost when Starbucks axed its distribution deal in 2011.

“By tapping into the loyal McCafé fan base already built by McDonald’s and leveraging our deep coffee category expertise here at Kraft, we have the ability to reach a larger audience than ever before, really giving this brand room to thrive”, Barton adds.

Kraft had supplied Starbucks-branded coffee beans to retailers in the US since 1998. It came to abrupt end in 2011 when Starbucks claimed Kraft had been mismanaged its brands.  Kraft challenged the early termination of the deal and an arbitrator ruled last year that Starbucks aged to pay 4.6bn to settle the dispute. The award went to Mondelez International, which was spun off from Kraft in 2012, and currently manages all the coffee brands it used to own.

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