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McDonald's specialty coffees start cool

A large cup of McDonald's "Premium Roast" coffee.

TEXT OF STORY

KAI RYSSDAL: Even if you're not part of the half-caff, double-shot, extra-hot latte crowd, you probably know Starbucks is facing some venti-size problems. Among the biggest is competition from McDonalds. When Mickey D's announced it was introducing specialty coffees, observers forecast it would suck up a good portion of the market.

But Marketplace's Jeff Tyler reports McDonalds' coffee sales haven't gotten the caffeinated jolt many expected.


JEFF TYLER: McDonald's has been test-marketing its new cappuccinos and lattes in Michigan and Kansas City.

BOB GOLDIN: It appears that the results haven't fully lived up to expectations.

That's Bob Goldin, a food industry consult with Technomic. He says, despite local advertising and promotion, McDonald's specialty coffees haven't been as popular as some analysts expected.

Some franchise owners have griped about the expense of the new machines and building renovations -- their share could be upwards of $20,000.

Again, Bob Goldin.

Goldin: Franchisees want a quick payback on their investment. So if things are, indeed, not quite where they had hoped they would be, discontent is inevitable.

But he says it's way too early to dismiss McDonalds. The company has yet to roll out its specialty-coffee national advertising campaign.

Consumers may be slow but analysts say they're likely to come around.

Tom Pirko is president of Bev Mark, a beverage industry consulting company.

TOM Pirko: Even though we're talking about a beverage, we're really talking about an image. And McDonald's is in the process of looking to upgrade its image.

McDonald's has already siphoned off some of Starbucks business with its lower-priced regular coffee. And with the fast-food chain charging about 30 percent less for its cappuccinos, Pirko is confident that it can attract high-end coffee drinkers too.

Pirko: They've taken on Starbucks, and I think over the long-term they'll take a nice, big chunk out of that business.

Coffee retailers aren't the only ones who should worry. Next, McDonald's plans to roll out its own line of smoothies.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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