Venti McLatte redux

Followup to an earlier post:

After unveiling plans earlier this year to sell espresso drinks at all of its U.S. locations, McDonald's Corp. now faces a fresh set of challenges.

The weak economy has prompted some consumers to brew coffee at home instead of buying it at coffee shops. A sharp pullback by Starbucks Corp., which is shutting hundreds of stores as its sales slow, has analysts questioning whether now is the right time for McDonald's to roll out its premium line of lattes, cappuccinos, smoothies and sweet, ice-blended frappes.

[...]

McDonald's executives have fought back against suggestions that the espresso drinks, the core of its biggest menu expansion in 30 years, aren't selling as well as expected. This summer, internal documents showed that sales of the drinks in several markets peaked about three weeks after the drinks launched. Then they declined in the following weeks, in some cases sharply, according to the documents, which were viewed by The Wall Street Journal.

Management contends the drop was due in part to a lull in demand for hot drinks during the summer, and that the full potential of the drinks can't be realized until they're backed by national advertising. "We are very much on track," says Janice Fields, chief operating officer for McDonald's U.S. business.

Drinks of all sorts tend to have higher profit margins than food items at McDonald's. But in a tough economy, the price of a premium drink could give people pause. Though less expensive than its competitors', McDonald's lattes, for instance, sell for between $1.99 and $2.99 at the Wheaton, Ill. store, making them more expensive than the chain's cheapest burger.

"It's a really tough time to come out with a premium product," says Larry Miller, a restaurant analyst at RBC Capital Markets.

McDonald's Coffee Strategy Is Tough Sell (WSJ, 27 October 2008)

Venti McLatte

McDonald's is set to launch coffee bars with "baristas" serving cappuccinos and lattes, moving into direct competition with global coffee chain Starbucks, the Wall Street Journal reported on Monday.

McDonald's will install coffee bars at its 14,000 U.S. stores, incorporating theatrics similar to Starbucks' counters, displaying espresso machines and having baristas prepare drinks, the report said.

The report, citing internal documents from 2007, said the move will add $1 billion to McDonald's annual sales of $21.6 billion. McDonald's will also sell smoothies and bottled beverages, it said.

McDonald's Coffee Bars to Take on Starbucks: WSJ (Reuters via CNBC)

For WSJ subscribers (oh, man, I can't wait for Murdoch to take down the paywall), the original article is here.

Very pertinent excerpt from the WSJ article:

Hailing from very different corners of the restaurant world, the two chains have gradually encroached on each other's turf. McDonald's upgraded its drip coffee and its interiors, while Starbucks added drive-through windows and hot breakfast sandwiches.

The growing overlap between the chains shows how convenience has become the dominant force shaping the food-service industry. Consumers who are unwilling to cross the street to get coffee or make a left turn to grab lunch have pushed all food purveyors to adapt the strategies of fast-food chains.

And MSNBC wins "best headline" on this story: "Coffee Clash." Heh.

For what it's worth, the "upgraded" coffee at McDonald's is pretty good these days... when I'm on the road, I'm quite happy to have a cup of McDonald's coffee.

The fries are the only other thing on their entire menu that I'll consume.

Of course, the thirty-six hours of wakefulness exacts its own price

The most expensive drink you can order at a Manhattan Starbucks:

A 13 shot venti soy hazelnut vanilla cinnamon white mocha with extra white mocha and caramel. It cost a total of $13.76 (with tax).

Cold-brewed iced coffee

Carrie is an inveterate iced-coffee drinker, even in the dead of winter; I occasionally indulge only in high summer, when it's too hot outside to contemplate anything but a cold drink.

Anyone who likes iced coffee should check out this excellent, brief piece of service journalism in the Times, which describes how to make cold-brewed iced coffee that tastes better than hot coffee cooled down.

(Related: Recipe link.)