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McDonald's goes after coffee aficionados

McDonald's Corp. is changing its conventional cup of coffee for the first time in 30 years, hoping that a stronger, richer blend will boost breakfast sales and better arm the burger giant in the ever hotter battle for coffee drinkers.

The new "premium roast" coffee is being served in some stores, and a full nationwide rollout is expected Monday. To reinforce its premium name, the more robust coffee comes in a new paper-covered Styrofoam cup and black lid.

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The change appears to follow the realization made by Dunkin' Donuts, Starbucks and Burger King years ago that Americans want a richer cup of joe than the nondescript blends they have been offered in the past.

And they are willing to pay for it. Americans spent $34.5 billion on coffee last year, 8.7 percent more than in 2004, according to Packaged Facts, a division of MarketResearch.com.

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Such a change could also be a risk for Oak Brook, Ill.-based McDonald's. Some may not want to drink, or pay for, anything more than a basic cup of coffee.

But McDonald's executives are convinced that a heartier coffee will bring more customers in for breakfast and, combined with convenience via its nearly 13,000 drive-through lanes, help lure more of the just-coffee crowd.

"The objective is to increase both coffee and breakfast sales," said Mike Roberts, McDonald's president and chief operating officer. "Premium coffee and specialty coffee are a really important part of the American breakfast experience."

Coffee is the latest product McDonald's has made premium, joining the ranks of Chicken Selects, new salads and sandwiches designed to lift what the company makes on the average order. The strategy is part of what has helped fuel 33 consecutive months of global sales growth.

In January, strong breakfast sales helped deliver U.S. sales that were 9.7 percent higher than in the previous year, the largest jump since September 2004.

Roberts said the company is hoping the new coffee will energize breakfast sales in the same way that the introduction of McGriddles did in 2005. McDonald's added 1.6 million new customers a day in 2004 when it added McGriddles breakfast sandwiches, salads and other menu items.

McDonald's has priced the premium coffee at about $1.20 for a 12-ounce cup, about 20 cents more than the cup of coffee it used to sell.

That's about 10 cents more than the price charged by Burger King for its BK Joe, and about 9 cents less than the similar-size cup of coffee from Dunkin' Donuts. Prices vary depending upon the outlet.

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Starbucks charges $1.50 for its small cup of coffee.

McDonald's is seeking to capitalize on the increasing consumption of coffee outside the home, according to the National Coffee Association, a New York trade group representing many of the country's coffee roasters.

The association reported that 39 percent of coffee drinkers consumed their brew outside the home in 2005, compared with 32 percent in 2001.

More important for McDonald's was a sharp increase in gourmet coffee consumption at restaurants compared with a coffee store such as Starbucks from 2004 to 2005.

The association reported that 16 percent of the nation's coffee drinkers said they bought their daily brew at a restaurant, compared with 11 percent who said they bought their coffee at a Starbucks-style coffee shop. That's a reversal from 2004, when 13 percent said they bought their daily fix at a coffee store, while 11 percent said they purchased it at a restaurant.

McDonald's has been testing specialty blends and plans to use a coffee roasted in California as its premium blend. Roberts said the company is also testing specialty coffees such as lattes, espressos and frappuccinos at 50 other restaurants.

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Kenneth Herbst, a marketing professor at the College of William and Mary in Williamsburg, Va., has his doubts about the strategy.

"Although some customers may come to McDonald's to purchase their premium coffee, I do not think that the increased traffic from a more premium form of coffee will be what builds major traffic for McDonald's in terms of breakfast consumption," he said. "McDonalds may sell more breakfast items as they begin to promote them, but I am not certain that the increase in sales will be attributed solely to the availability of a new morning coffee brew."

Herbst doesn't think Starbucks has much to worry about.

"I do not think that McDonald's premium coffee is going to cut away significantly from Starbucks, even if the time between order and delivery of the coffee to the customer is significantly shorter than Starbucks'," the William & Mary professor said.

"The Starbucks brand carries significant equity in the coffee category and has a wonderful emotional tie with consumers," Herbst said. "McDonald's coffee will have a hard time pulling loyal Starbucks customers away from their daily treks into Starbucks."

Still, Roberts said, coffee and specialty coffees are important to McDonald's future worldwide.

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"We know what an important play specialty coffees are. There is a lot of activity related to coffee, and we are optimistic," he said.

John Schmeltzer writes for the Chicago Tribune.


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