Is McDonald's free coffee a convenient excuse for bigger plans?(Read article summary)
We all know about the 'Breakfast Wars' that have popped up ever since Taco Bell targeted McDonald's with its breakfast ads, and McDonald's retaliated with free coffee. But could the free coffee at McDonald's actually be a way to launch another product?
The news is that McDonald’s will be giving away free small coffees during breakfast hours from today through April 13. Why? Could it be the prelude to testing McCafé coffee at retail?
McDonald’s frequently hands out free coffee. National Coffee Day, Sept. 28, 2013: free coffee in most markets. Again last December: free coffee in many markets. So the tactic is hardly new: Burger King gave free coffee with breakfast in January. But McDonald’s insists this will be its “first-ever national Free Coffee Event.” Again, why?
McDonald’s sells bagged McCafe coffee in Canada and plans to test it here. Is now the time?
“Breakfast wars!” is the trendy if horribly clichéd explanation. The thinking is that free coffee will keep breakfast eaters from swapping their Egg McMuffin for the A.M. Crunchwrap on Taco Bell’s new breakfast menu. But I wonder how many McDonald’s breakfast eaters even know if there’s a Taco Bell on their way to work. If Taco Bell were a major threat, its annual per-store sales would be higher than roughly $1.4 million. McDonald’s are more than $1 million higher.
So what’s the official explanation? “This event is McDonald’s way of encouraging new guests to try McCafé Coffee while giving our breakfast lovers even more reason to enjoy the great taste of our signature blend,” the company said in its release.
Right. McDonald’s Corp. 10-k SEC filing says its marketing plan for 2014 is, in part, to “enhance the breakfast experience by emphasizing coffee through high-quality McCafé products paired with delicious foods—both existing and new.” So this coffee promotion is in line with the existing marketing plan.
Now here’s my question: Wouldn’t McDonald’s be smart if it conducted these upcoming “Make Friends with McCafé” coffee-sampling events right before it launches McCafé coffee at retail?
McDonald’s hasn’t said when it will begin testing McCafé whole-bean, ground and K-cup coffee in supermarkets (as it already does in Canada). But last October, Tony Vernon, CEO of coffee partner Kraft Foods, said testing would begin this year. A McDonald’s Corp. spokesperson said then, “We are building on the momentum of our McCafé beverages in our restaurants by expanding these options…to grocery stores and other retail locations.”
I confess I’m postulating here. I have no solid information that test-market sales begin after the giveaway, but spring seems like a good time to do it, doesn’t it?
I think McDonald’s is more focused on getting a share of the retail coffee market than it is on blunting Taco Bell’s breakfast menu. Researcher Mintel estimated U.S. coffee sales at $11.7 billion in 2013, up 11.4% from 2012. Data from Statista shows that the average American adult spent $21.32 a week on coffee in 2013 (up from $23 in 2012). Some of that spending was at QSRs and coffee shops, the rest came at work and home. McDonald’s would like a nice big slice of the non-foodservice spend.
And 25% of Americans now own single-serve brewing systems such as the Keurig, making that an especially appealing market (which is why Starbucks, Tim Hortons, Dunkin’ Donuts and others are already there). Consumers spent $3.1 billion on single-serve coffee pods last year, according to Mintel. Who wouldn’t want a piece of that business?
So maybe the coffee promotion has nothing to do with any phony “war” over breakfast or coffee or Ronald or anything else. McDonald’s might just want us all to “Make Friends with McCafé” before McCafé comes to live in our homes. We’ll see.