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