McDonald's revamps McCafe brand as it lags Starbucks

McDonald’s, losing ground in its battle for the nation’s coffee drinkers, is planning to shake up its McCafe brand -- part of a bid to challenge Starbucks and Dunkin’ Donuts.

The company will reintroduce the McCafe concept next year, about eight years after it debuted nationwide. The push follows efforts to upgrade its java and get more of its beans from sustainable sources, mimicking a move by its Seattle-based rival.

“We’re really excited about the McCafe brand and what it can do to complement our food offerings,” Kristy Cunningham, US senior vice president of strategy and insights, said in an interview. The new McCafe campaign will include special deals, more seasonal beverages and increased marketing of the chain’s coffee rewards programme, she said.

Coffee is still a booming business in the US, but fast-food companies haven’t been able to capitalise on much of that growth. Sales at burger chains rose just 3.3 per cent last year, compared with an almost 10 per cent jump for coffee cafes, according to research firm Technomic. Though McCafe generates US$4 billion annually in US sales, it could better cater to customer needs, Cunningham said.

Starbucks and Dunkin’ Donuts have attracted customers with high-margin espresso, lattes and mochas. Though McDonald’s offers a wide range of coffees these days, it hasn’t become as much of a go-to source for upscale drinks.

McCafe is “a very important piece,” Cunningham said. “It gives us the chance to follow what the customer is really looking for.”

Re-emphasizing coffee is critical at a time when food sales are under pressure. Supermarkets have lowered prices, making it more alluring to eat at home instead of at a restaurant. Gas stations and other channels also are increasingly selling prepared meals, adding to the competition.

McDonald’s is looking to build on the success of its all-day breakfast, which rolled out last year across the US. 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 roll-out fizzled. The company later merged with Tim Hortons, a Canadian coffee chain, though the two brands remain distinct.

(SCMP)