McDonald's tries business of brewing bliss

McDonald's, which is already faring well in the recession, is hoping to brew up even more business with its new espresso-based McCafe coffees.

The fast-food chain began gradually rolling out the new beverage line, which includes cappuccinos and iced and hot lattes and mochas, in late 2007. Now the espresso drinks are being officially introduced in southern Colorado, though some area McDonald's have had them for months. The line was rolled out in the Denver area last fall.

A regional advertising campaign began Monday; before then, local McDonald's used only in-store marketing to get the word out on the new drinks. Even so, "there's been some buzz," said Jason Thompson, owner of two McDonald's on the east side of Colorado Springs. "People are excited about it."

Prices may vary a bit among locations. At the McDonald's owned by Thompson at Platte Avenue and Murray Boulevard, posted prices range from $2.29 for a 12-ounce drink to $3.19 for a 22-ounce one.

David Napier, who owns four McDonald's in Pueblo, said he's seen new customers - and old customers coming in more often - since his locations began serving the espresso drinks.

"We are quickly becoming a coffee destination."

Analysts say the new beverages could make McDonald's a big player in the specialty coffee sector once ruled by Starbucks Corp., which has been closing stores and cutting jobs. Starbucks just launched a new multimillion dollar marketing campaign meant to take on lower-priced rivals such as McDonald's, though the campaign doesn't mention any competitors.

One print ad tells consumers to "beware of a cheaper cup of coffee," adding "it comes with a price." Another warns customers that "compromise leaves a really bad aftertaste."

Napier says McDonald's is offering specialty coffee "at a great value and of the highest quality."

"I don't think our customers who are budget-minded expect less, and they don't get that from McDonald's," he said.

The new line can be an expensive proposition for franchisees, with reported investments of up to $100,000 per restaurant for the coffee machine and renovations to accommodate the McCafes, though the company shares in the bill. Thompson declined to confirm that figure, but said it was a worthwhile investment "to stay relevant to our customers."

Learning to operate the high-tech coffee machine, he said, is different from rolling out a new breakfast sandwich.
"I personally trained all the employees on making the specialty drinks," he said.

McDonald's Corp. recently reported that its first-quarter profit climbed nearly 4 percent as more customers worldwide flocked to the Golden Arches, with sales of chicken, breakfast and beverages particularly strong. The coffee blitz, however, has caused angst among some franchisees, according to several surveys, which covered more than 200 McDonald's outlets, by restaurant industry analyst Mark Kalinowski. Some franchisees fear it will be an expensive flop, and more recently they have worried about diverting precious ad spending to specialty coffee.

Thompson said he doesn't share those fears.

"It's a great time to be a McDonald's franchisee," he said.
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Gazette news services contributed to this story.