McDonalds $100M Ad Campaign & McCafe Roll Out
By now I would not be surprised if nearly all of us have seen a new ad, heard a radio blurb, or have driven by a new McCafe, adorned with banners and ads for their new coffee and espresso beverages. Yesterday, McDonalds started the launch of a new $100M ad campaign that is promoting their McCafe rollout and an expanded espresso and coffee menu.
Nearly 11,000 out of their 14,000 locations in the US have a McCafe nestled inside and have undergone renovations. I read on Dow Jones NewsPlus page that most of the $100k McD's spent on the McCafe installs went towards the efficiency of their drive-thru systems and how the service time can be optimized while also offering a diverse new menu in addition to burgers and fries.
So how does this effect the "specialty" coffee retailer and indy coffee shop owner?
In my opinion, McDonalds is very optimistic if it plans on becoming a "specialty" coffee destination, as the quality of the espresso and coffee it serves is on par with the quality of their food. This is a given, and I don't think McD's is trying to market their drinks as being better on a quality level, but more so on a price point that meets the needs of consumers who may be searching out a deal. Also, I don't see the majority of their McCafe business coming from "new" customers, but more so from existing McDonalds patrons who may add a latte now to their usual breakfast combo meal. It seems they have found a profit center with a high margin, to increase sales and are capitalizing on it.
Also, I mentioned earlier that most of the McCafe efforts were put into the drive-thru portion of the store. This seems cohesive with the idea that McDonalds is not trying to become the "third place" coffee house that Starbucks has tried to position itself as for decades. McCafe's have put effort into the interiors of the McCafe to make them more comfortable, rustic bronze wallpaper, wood accents, tile, etc. but they have a dubious task of changing the consumers perception of McD's as an upscale establishment across the board in my opinion.
I can see this roll out effecting some business for drive thru coffee shops (and inline stores in some cases) that are not focused 100% on quality. This is nothing new. In today's specialty coffee industry, as a retailer you must do everything right. Offer a great product, great customer service, great ambiance and branding, and most important of all, know how to operate and run a sustainable and successful business.
Over the past 8 years I have seen an escalation of quality focused coffee bars opening up and immediately doing well. It has become even easier to differentiate yourself as a retail from your competition of other mom and pops, the chains and ... now ... Dunkin Donuts and McDonalds.
Similar to great restaurants, those retailers who focus on great customer service, professional training programs, excellent coffee and quality menu items will be in a category of their own. The silver lining is that with the exposure and customer base McDonalds has, they will for sure be selling mochas and lattes to customers who may have yet to try anything beyond a flavored coffee, and we will see the demographic of espresso beverage drinkers increase. Similar to how we sometimes thank Starbucks for broadening the market and developing new markets, McDonalds has this ability and it will happen quick.
McD's has impeccable timing as well ... with the "economic downturn" and a country obsessed now with cutting back and not spending money, the idea of saving a buck seems appealing to many. However, the consumer who is used to having a great latte each day will learn very quickly that you get what you pay for. A mocha made by an untrained barista on a super automatic machine in 44 seconds will not taste like one made from fresh roasted coffee beans, high end chocolate, fresh velvety milk from local dairy and served by a professional who understands the chain of events that coffee has traveled thru to get to that (biodegradable) to go cup.
My advice is to always serve your coffees with a goal of perfection. CHARGE MORE than Starbucks and McDonalds, as your serving a far superior product and at only $1 or so more a cup, you are still serving an affordable luxury. Let's let the big guys battle it out, but together we need to take this as an opportunity to truly separate the "specialty" coffee retailers from the caffeine slingers looking to capitalize on this high margin industry.
Would love to hear your thoughts and continue this discussion to see how the "specialty" industry, who each of us understand our markets better than a corporate giant, can educate our consumers on why they should buy from us.
- Matt
Nearly 11,000 out of their 14,000 locations in the US have a McCafe nestled inside and have undergone renovations. I read on Dow Jones NewsPlus page that most of the $100k McD's spent on the McCafe installs went towards the efficiency of their drive-thru systems and how the service time can be optimized while also offering a diverse new menu in addition to burgers and fries.
So how does this effect the "specialty" coffee retailer and indy coffee shop owner?
In my opinion, McDonalds is very optimistic if it plans on becoming a "specialty" coffee destination, as the quality of the espresso and coffee it serves is on par with the quality of their food. This is a given, and I don't think McD's is trying to market their drinks as being better on a quality level, but more so on a price point that meets the needs of consumers who may be searching out a deal. Also, I don't see the majority of their McCafe business coming from "new" customers, but more so from existing McDonalds patrons who may add a latte now to their usual breakfast combo meal. It seems they have found a profit center with a high margin, to increase sales and are capitalizing on it.
Also, I mentioned earlier that most of the McCafe efforts were put into the drive-thru portion of the store. This seems cohesive with the idea that McDonalds is not trying to become the "third place" coffee house that Starbucks has tried to position itself as for decades. McCafe's have put effort into the interiors of the McCafe to make them more comfortable, rustic bronze wallpaper, wood accents, tile, etc. but they have a dubious task of changing the consumers perception of McD's as an upscale establishment across the board in my opinion.
I can see this roll out effecting some business for drive thru coffee shops (and inline stores in some cases) that are not focused 100% on quality. This is nothing new. In today's specialty coffee industry, as a retailer you must do everything right. Offer a great product, great customer service, great ambiance and branding, and most important of all, know how to operate and run a sustainable and successful business.
Over the past 8 years I have seen an escalation of quality focused coffee bars opening up and immediately doing well. It has become even easier to differentiate yourself as a retail from your competition of other mom and pops, the chains and ... now ... Dunkin Donuts and McDonalds.
Similar to great restaurants, those retailers who focus on great customer service, professional training programs, excellent coffee and quality menu items will be in a category of their own. The silver lining is that with the exposure and customer base McDonalds has, they will for sure be selling mochas and lattes to customers who may have yet to try anything beyond a flavored coffee, and we will see the demographic of espresso beverage drinkers increase. Similar to how we sometimes thank Starbucks for broadening the market and developing new markets, McDonalds has this ability and it will happen quick.
McD's has impeccable timing as well ... with the "economic downturn" and a country obsessed now with cutting back and not spending money, the idea of saving a buck seems appealing to many. However, the consumer who is used to having a great latte each day will learn very quickly that you get what you pay for. A mocha made by an untrained barista on a super automatic machine in 44 seconds will not taste like one made from fresh roasted coffee beans, high end chocolate, fresh velvety milk from local dairy and served by a professional who understands the chain of events that coffee has traveled thru to get to that (biodegradable) to go cup.
My advice is to always serve your coffees with a goal of perfection. CHARGE MORE than Starbucks and McDonalds, as your serving a far superior product and at only $1 or so more a cup, you are still serving an affordable luxury. Let's let the big guys battle it out, but together we need to take this as an opportunity to truly separate the "specialty" coffee retailers from the caffeine slingers looking to capitalize on this high margin industry.
Would love to hear your thoughts and continue this discussion to see how the "specialty" industry, who each of us understand our markets better than a corporate giant, can educate our consumers on why they should buy from us.
- Matt
Replies to This Discussion
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Permalink Reply by Jason Dominy on
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They, like Charbucks before them, are doing well to remind people that there is this specialty coffee industry, and that there's more than drip brew. If we are able to expose them to what we have at some point, and show them the difference in quality, we win. If what we offer is no different than what they get in a McD, Dunkin, or Charbucks, you're screwed. We have to compete on quality, since we can't compete on price or marketing. You have to understand that. And that's the best way to compete, is to dig in, stick to what you do, and let it pan out in the end. For many years Apple has made a computer that many, including me, know is superior to a PC running Microsoft. But, it wasn't very popular until very recently. To this day, they are a hardware and software company, not wavering on either front with their sole purpose to be the best they can, even if it's more expensive, and it is. You pay more for higher quality. But, if you read the new Consumer Reports, you will see that Apple blew away all other computer companies in terms of quality and satisfaction among consumers.
And that's what I mean. You have to commit to being the best, digging in, cutting costs where you can without cutting quality, and focusing on the customer. They will be your best weapon against the big clown.
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Permalink Reply by Dr. Joseph John on
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In the early days, the big chain had pretended that they were serving the highest quality espressos, cappuccinos and lattes and most consumers believed them; and that justified the high prices. More recently, consumers thought otherwise and the big chain seems to drift towards serving "good enough" coffee. This is precisely where McCafes and Dunkin Donuts are taking them on.
Just like the big chain introduced "specialty coffee" to the upper- and upper middle-class, McCafes and Dunkin Donuts will broaden the demographics of the "specialty coffee marketplace."
That leaves both the high end and the low end of the quality spectrum for the independents. Unfortunatley, the independents serving high quality "specialty coffee drinks" are still in the minority. That is hard to believe looking at all the barista contests, latte art competitions, ..... If you look carefully, the number of participating organizations at these events is very small. These progressive independents will do fine raising the quality level on a regular basis.
But the majority of independents in North America operate from a very low knowledge base. They have never been properly trained and they have never been to a coffee trade show. They do not subscribe to a coffee trade magazine nor are they good at reading books. They are serving a significant number of consumers who are getting the wrong impression of what an espresso, or cappuccino, or latte is. The real challenge is to upgrade their knowledge base and improve the quality of the "specialty coffee they offer."
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Permalink Reply by Chris DeMarse on
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In a three person shoot out, the best way to survive is to step out of the way and let the other two shoot each other. If we, in the coffee industry, really carry out our values on the other side of this we remove ourselves from this argument of a quality because we are essentially in a different market. Grant Achatz from ALINEA in Chicago doesn't worry about what Chili's and Applebee's have new on their menu because he is serving food on a different level. We shouldn't fuel the silliness of fighting in a market we don't belong in. Let Starbucks and McD's duke it out; in the end McDonald's will win because of their supporting capital and versatility of product, leaving those who are really looking for a gourmet experience at all the high quality indie shops. No need to worry about fighting a fifth grader when you're a grad student.
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Permalink Reply by Peggy Gargaro on
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I agree that the BIG Dogs need to fight this one out. It is just a wake up call to us indys that may have rode the waive when the economy was great. Buckle down and make sure that all your "i's" are dotted and "t's" are crossed. Educate your employees of what is coming out from McD's so that they don't look stupid behind the counter when asked. We serve a far superior product than anyone else and we have skilled people to do it.
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Permalink Reply by stefany Dybeck on
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I read the NASTF article and the article this morning in Advertising Age. McDonalds is brilliant. I don’t think they are trying to fit into an existing specialty coffee industry. They are investing in McCafe, their very own brand extension that feeds themselves not specialty coffee. They can totally compete with Starbucks on many levels most importantly overall value. I think this 100 million dollar investment in advertising will drive trial. They can get new customers. They are using ok coffee, maybe not the quality level you like but not 711 either. They are using similar machines to Starbucks, they are faster than Starbucks, arguable more consistent than Starbucks. I think they have a shot. McDonalds will be successful given its well known strategies for training, consistency and thru-put. These guys can run stores and they have something that Starbucks can never have, the Egg McMuffin. Maybe when all these new coffee drinkers and McCafe goers have a hankering for something a bit more specialized or they graduate from high school, they can visit one of our cafes or coffee houses.
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McCafe, Hong Kong, March, 2008
Excerpt from review -
However, this was one of the absolute best cappaccinos I have had anywhere. Anywhere. Even the presentation was near perfection. Microfoam was nice and tight. Latte art was very good and varied daily. Cap was strong yet smooth with no bite and a very slight chocolate taste. Hand made, executed on a semi automatic machine, NOT a fully automatic. Hand tamping appeared to be in the 25-30lb range.
Link to review w/pic:
http://members.virtualtourist.com/m/cbdf9/5d6/2/ - Attachments:
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IMGP0399.JPG, 130 KB
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I think that it will eventually "weed out" the people who are not truly interested and cause the truly interested to want better....
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Permalink Reply by bobby monstar on
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Permalink Reply by Davide Birse on
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I don't often voice oppinions, i'm new to all this. I dont think any of us small indies have a worry. Lot's of us have seen Costa or starbucks open up at the end of our street or next to us, and we've survived on how different we are from them. If people want a quick mediocre and well presented coffee fix, let them choose between the giants. If they want something special, then we wil always be here.
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Permalink Reply by Jon Mitchell on
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Matt - Do you really feel that in this time of everyone pinching pennies and looking for a deal that charging $1 or so more than say Starbucks and McDonalds is the right way to go? I mean, you surely know more about this than I do but I'm just not sure about the rationale. In the South, I'm not sure how that'd fly, especially to the non-educated coffee drinker.
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Permalink Reply by greg costello on
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big corporates are always looking to have more get more. The idea of shifting to specialty coffee makes as much sense as gas stations in england selling 'gourmet' coffee. Its a nice dream but the margins are just not there for corporates and hence the cottage industry of specialty coffee. Its the same reason sony doesnt make more commitment to certain products even though they are electronics giants.
If I was a senior manager I would strip away the dream of selling tofu to japanese. Embrace the market. Refocus customer service on cheer. run down holding stock so burgers are fresher and fresher made, even if 3 or 4 times an hour you have a stock out.
But most importantly GET RID of chicken nuggets and get back to selling real chicken like KFC still do. Nuggets were such a poor quality choice how can they roll forward with coffee quality while the food is still........ anyway good luck McDonalds. Just another example of corporates finding fixing problems in own backyard too hard so dream about taking, having, our business.
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Permalink Reply by J. Spike Rogan on
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Having once worked for the Sith Empire (Starbucks), I can tell you a few things.
1. Mega chains are all about capitalism NOT quality of product. They always give the good PR spin its about quality. But with time Scab-bucks became more and more watered down. Anything to increase profit margins.
2. Atleast the empire hand steams milk. McGarbage and Dunking Doh-nuts its all automated. You just as well visit the local Greyhound bus station, and buy a cappachino from the vending machine that dispenses cups with playing cards on them.
3. I had a coupon for a free McCafe beverage and used it this AM. The Mocha was nothing more than crappy hot chocolate. I couldn't taste any coffee product at all!
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