Is McDonald's free coffee a convenient excuse for bigger plans?
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The news is that McDonald鈥檚 will be giving away free small coffees during breakfast hours from today through April 13. Why? Could it be the prelude to testing 惭肠颁补蹿茅 coffee at retail?
McDonald鈥檚 frequently hands out free coffee. National Coffee Day, Sept. 28, 2013: free coffee in most markets. Again last December: free coffee in many markets. So the tactic is hardly new: Burger King gave free coffee with breakfast in January. But McDonald鈥檚 insists this will be its 鈥渇irst-ever national Free Coffee Event.鈥 Again, why?
McDonald鈥檚 sells bagged McCafe coffee in Canada and plans to test it here. Is now the time?
鈥淏reakfast wars!鈥 is the trendy if horribly clich茅d explanation. The thinking is that free coffee will keep breakfast eaters from swapping their Egg McMuffin for the A.M. Crunchwrap on Taco Bell鈥檚 new breakfast menu. But I wonder how many McDonald鈥檚 breakfast eaters even know if there鈥檚 a Taco Bell on their way to work. If Taco Bell were a major threat, its annual per-store sales would be higher than roughly $1.4 million. McDonald鈥檚 are more than $1 million higher.
So what鈥檚 the official explanation? 鈥淭his event is McDonald鈥檚 way of encouraging new guests to try 惭肠颁补蹿茅 Coffee while giving our breakfast lovers even more reason to enjoy the great taste of our signature blend,鈥 the company said in its release.
Right. McDonald鈥檚 Corp. 10-k SEC filing says its marketing plan for 2014 is, in part, to 鈥渆nhance the breakfast experience by emphasizing coffee through high-quality 惭肠颁补蹿茅 products paired with delicious foods鈥攂oth existing and new.鈥 So this coffee promotion is in line with the existing marketing plan.
Now here鈥檚 my question: Wouldn鈥檛 McDonald鈥檚 be smart if it conducted these upcoming 鈥淢ake Friends with 惭肠颁补蹿茅鈥 coffee-sampling events right before it launches 惭肠颁补蹿茅 coffee at retail?
McDonald鈥檚 hasn鈥檛 said when it will begin testing 惭肠颁补蹿茅 whole-bean, ground and K-cup coffee in supermarkets (as it already does in Canada). But last October, Tony Vernon, CEO of coffee partner Kraft Foods, testing would begin this year. A McDonald鈥檚 Corp. spokesperson said then, 鈥淲e are building on the momentum of our 惭肠颁补蹿茅 beverages in our restaurants by expanding these options鈥o grocery stores and other retail locations.鈥
I confess I鈥檓 postulating here. I have no solid information that test-market sales begin after the giveaway, but spring seems like a good time to do it, doesn鈥檛 it?
I think McDonald鈥檚 is more focused on getting a share of the retail coffee market than it is on blunting Taco Bell鈥檚 breakfast menu. Researcher estimated U.S. coffee sales at $11.7 billion in 2013, up 11.4% from 2012. Data from shows that the average American adult spent $21.32 a week on coffee in 2013 (up from $23 in 2012). Some of that spending was at QSRs and coffee shops, the rest came at work and home. McDonald鈥檚 would like a nice big slice of the non-foodservice spend.
And of Americans now own single-serve brewing systems such as the Keurig, making that an especially appealing market (which is why Starbucks, Tim Hortons, Dunkin鈥 Donuts and others are already there). Consumers spent $3.1 billion on single-serve coffee pods last year, according to Mintel. Who wouldn鈥檛 want a piece of that business?
So maybe the coffee promotion has nothing to do with any phony 鈥渨ar鈥 over breakfast or coffee or Ronald or anything else. McDonald鈥檚 might just want us all to 鈥淢ake Friends with 惭肠颁补蹿茅鈥 before 惭肠颁补蹿茅 comes to live in our homes. We鈥檒l see.