Researchers: McDonald’s Coffee Sales Are Stale

McDonald Corp.’s coffee program may not be posting sales as high as some analysts had hoped, according to The Chicago Tribune and Technomic.

Specialty coffee sales in McDonald’s test markets seem tepid, the Tribune reported, adding that the category accounted for less than 3% of sales per restaurant.

"Those numbers indicate they are off to a slow start," said Ron Paul, president of restaurant consultant Technomic Inc., after analyzing company sales data obtained by the Tribune.

A senior McDonald’s executive who heads the national franchisee association, however, said specialty coffee sales are on target.

"It is absolutely to our expectations and actually a little greater," said Don Thompson, president of McDonald’s USA.

Analysts, including Paul, noted that the coffee rollout is in its nascent stages, and national advertising for the product, a vital sales tool, hasn’t begun, the newspaper reported.

So far, only about 1,400, or 10%, of McDonald’s U.S. restaurants are selling caramel cappuccinos and the like.
Jason West, a stock analyst at Deutsche Bank Securities, told the newspaper he would "probably like to see higher" specialty coffee sales at this point, but added he’s "not shocked" by the sales data.

"It will take awhile for it to catch on,” West said.

Specialty coffee is the anchor of a bold offensive to make Oak Brook, Ill.-based McDonald’s a beverage destination and a hub for fancy coffee, smoothies and even bottled sodas and energy drinks.

McDonald’s began testing specialty coffee in Michigan in late 2006 and in Kansas City in late October 2007, launching regional advertising and marketing campaigns in both areas.
For the four weeks ended May 1, Kansas City outlets on average sold 301 specialty coffee items per week, while Michigan stores sold 286 per week, according to a company document obtained by the Tribune. For all test market stores combined, the average was 293.

Paul said a restaurant operator would want a new product to constitute at least 3% of sales after six months to a year on the market. For a well-known brand like McDonald’s, it would be closer to six months, he said.


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