While the iconic Golden Arches signal convenience to many consumers, McDonald’s USA proved two years ago that it could be more than quick and value-priced with the introduction of its Premium Roast Coffee and other premium food offerings. Now that the coffee has kicked in, the Oak Brook, Ill.-based restaurant chain is using its beverage portfolio to make it more contemporary and relevant â€” and plans on giving other beverage-focused retailers a run for their money. It all begins with the customers. “Customers’ beverage tastes have evolved over the last few years. It’s clear to us, with those change in tastes, there’s an opportunity for us to meet more of their needs,” says the man behind the move, John Betts. As McDonald’s vice president, national beverage strategy, Betts led the team that currently is rolling out the beverage business. He was recently promoted to president of McDonald’s Restaurants of Canada Ltd. Don Thompson, president of McDonald’s USA, emphasized beverages changing role with the company when he commented in an analyst meeting late last year: “We want to move from beverages as an accompaniment to being a beverage destination.” That’s a promising statement for beverages from the world’s largest restaurant chain. McDonald’s operates more than 31,000 restaurants in 118 countries, with almost 14,000 U.S. restaurants. Serving nearly 56 million customers every day, McDonald’s revenues reached a record high of $22.8 billion on global comparable sales in 2007. In its fourth-quarter reporting, Jim Skinner, McDonald’s Corp.’s chief executive officer, touted McDonald’s beverage performance. “For the quarter, the U.S. business generated solid comparable sales growth of 3.3 percent and increased operating income by 6 percent by staying in tune with growing consumer demand around breakfast, beverages and everyday value,” he said. With the challenges of rising food costs and a slowing economy, a strong beverage menu, including the introduction of specialty coffee drinks and the testing of bottled beverages, new fountain options and smoothies, offers the restaurant giant an opportunity to increase revenue. To go along with the new beverage lineup, the company also is revamping its look. McDonald’s restaurants are being redesigned to become more contemporary, with some locations featuring leather chairs, high-top tables, flat-screen TVs and even fireplaces. More than 9,000 of its restaurants offer a wireless connection for customer convenience. And being convenience driven, McDonald’s restaurants are opening earlier â€” nearly 80 percent are open at 5 a.m. â€” and staying open later or not closing at all.
McDonald’s beverage expansion began in 2006 with the launch of its Premium Roast drip coffee. As with other new products debuting on the menu at the time, such as Premium Chicken Sandwiches and the Asian Salad, Premium Roast Coffee reflected the consumer trend toward premium products. “The intent was to really contemporize and take our blend to the next level based on consumers’ changing taste preferences and desire for more sophisticated coffee drinks,” says Danielle Paris, menu management – food innovation and development for McDonald’s USA. “Once we did that, it really helped us establish credibility in the coffee industry.” Premium Roast Coffee sales increased 30 percent during 2007, reported Jan Fields, McDonald’s USA’s executive vice president and chief operating officer, during a Webinar late last year. The idea for Premium Roast Coffee began in McDonald’s Michigan restaurants. Betts, who has 38 years of McDonald’s experience and has been a McDonald’s general manager in three U.S. regions, served four years as the Michigan region’s general manager. It was while he was in Michigan that much of the work with Premium Roast Coffee began. “We recognized that we had a business opportunity in the area of breakfast,” Betts says. “In the morning, coffee is the primary motivator for customers. The coffee offering we had was good, but it wasn’t resonating.” The richer, bolder, robust Premium Roast Coffee really struck home with customers, Betts says. “We enjoyed a great deal of feedback from them and certainly enjoyed the changes in our business around the coffee,” he says. “We discovered that they wanted even more.” The next step for McDonald’s was making its premium coffee offering more convenient for customers. “Most of our coffee goes through the Drive-Thru, and listening to customers, something that was important to them was saving a little time,” Betts explains. With McDonald’s serving 26 million U.S. customers a day and two-thirds of the patrons going through the Drive-Thru, McDonald’s instituted “coffee customization.” Employees add sugar and cream to the coffee to the customer’s specification, and the customer doesn’t have to stop, pull over and put the cream and sugar in the cup and stir. Last year, McDonald’s continued its coffee development by adding Iced Coffee options in Plain, Hazelnut and Vanilla flavors. Gathering feedback from customers and owner operators, McDonald’s discovered that customers thought the coffee changes were terrific, but they wanted to know what’s next, Betts says. “We started with tests in some markets to offer the espresso-based coffees to see what kind of reaction the customers would have,” he says. “Coming off our successful launch of the Premium Roast, they took to it very quickly.”
Beverage Industry’s October issue spotlights leaders throughout the beverage market and how they are steering their company’s throughout the pandemic. Also in this issue is an update on the bottled water market and it continues to post strong volume gains, how natural and organic retailers are combating broader competition, the ingredient solutions available for next-generation performance beverages, and much more!