OAK BROOK, Ill. -- Smoothies, iced coffee and other specialty coffees could be added to the menu at U.S. McDonald's restaurants, a top executive of the world's largest restaurant chain said Wednesday.
Ralph Alvarez, president and COO of McDonald's Corp., said the company is exploring those drinks and others as it seeks destination beverages to bring new customers to its restaurants, according to an Associated Press report.
Our beverages have really been complementary to a sandwich purchase, he said at a conference sponsored by [image-nocss] Bear Stearns in New York. That's the space we offer it in. So we are going after destination beverages that attract visits from customers to McDonald's throughout the day.
McDonald's already has scored a hit beverage recently with the addition of premium coffee to its more than 13,700 U.S. restaurants a year ago. Alvarez said coffee unit volume is up 15% as a result.
The introduction of a higher-priced coffee was part of the Oak Brook, Ill.-based chain's push to grow its breakfast business, and Alvarez made clear that expansion effort remains a top priority as reflected by aggressive marketing and new products.
Up next is the cinnamon melt, which Alvarez described as a warm, pull-apart sweet roll with cinnamon glaze. It is to be rolled out in 11,000 U.S. McDonald's by summer.
Customers recognize that McDonald's is now more than a hamburger restaurant, he said in remarks broadcast on the Internet. We're also about chicken, we're about salads and very importantly we're about breakfast.
Despite the push on other products, he noted, McDonald's still sells more hamburgers than it did four years ago.
Morningstar analyst John Owens told AP that McDonald's latest priorities reflect an industrywide effort to draw more customers at times when restaurants traditionally aren't full. Like Starbucks, he said, McDonald's would like for people to come into their restaurants throughout the day as well and maybe have one of these new snacks wraps and one of these new beverages, and give people more reasons to visit more often.
Alvarez acknowledged in response to an analyst's question that McDonald's was slow to introduce a higher-quality coffee, just as it was slow to follow others in adding more chicken items to its menu. Quite honestly we were more focused on replicating the restaurants we had than keeping up with trends, he said.
Carl Sibilski, managing director of Oyster Capital Management, a Chicago-based hedge fund, said the chain doesn't need to be first with trends. McDonald's is so large that they don't really need to invent anything at this point, he told AP. For McDonald's, it's more important to recognize new things that are working well for competitors and finding a way to incorporate it into their system.
Pursuing specialty beverages is a good idea, he said.
Meanwhile, Starbucks chairman Howard Schultz's recently issued a memo warning top executives that the Starbucks experience has been watered down, reported The Seattle Times. Schultz lamented in the February 14 memo that some decisions have resulted in stores that no longer have the soul of the past.
He said, Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience.
He is worried about competitors, saying that some decisionssuch as switching to automatic espresso machines and using flavor-locked coffee packaginghave left openings for other coffee shops to appeal to former Starbucks customers. That situation must be eradicated, he said in the memo.
Schultz does not offer specific solutions, but said he wants the Seattle-based company to be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.