By now I would not be surprised if nearly all of us have seen a new ad, heard a radio blurb, or have driven by a new McCafe, adorned with banners and ads for their new coffee and espresso beverages. Yesterday, McDonalds started the launch of a new $100M ad campaign that is promoting their McCafe rollout and an expanded espresso and coffee menu.

Nearly 11,000 out of their 14,000 locations in the US have a McCafe nestled inside and have undergone renovations. I read on Dow Jones NewsPlus page that most of the $100k McD's spent on the McCafe installs went towards the efficiency of their drive-thru systems and how the service time can be optimized while also offering a diverse new menu in addition to burgers and fries.

So how does this effect the "specialty" coffee retailer and indy coffee shop owner?

In my opinion, McDonalds is very optimistic if it plans on becoming a "specialty" coffee destination, as the quality of the espresso and coffee it serves is on par with the quality of their food. This is a given, and I don't think McD's is trying to market their drinks as being better on a quality level, but more so on a price point that meets the needs of consumers who may be searching out a deal. Also, I don't see the majority of their McCafe business coming from "new" customers, but more so from existing McDonalds patrons who may add a latte now to their usual breakfast combo meal. It seems they have found a profit center with a high margin, to increase sales and are capitalizing on it.

Also, I mentioned earlier that most of the McCafe efforts were put into the drive-thru portion of the store. This seems cohesive with the idea that McDonalds is not trying to become the "third place" coffee house that Starbucks has tried to position itself as for decades. McCafe's have put effort into the interiors of the McCafe to make them more comfortable, rustic bronze wallpaper, wood accents, tile, etc. but they have a dubious task of changing the consumers perception of McD's as an upscale establishment across the board in my opinion.

I can see this roll out effecting some business for drive thru coffee shops (and inline stores in some cases) that are not focused 100% on quality. This is nothing new. In today's specialty coffee industry, as a retailer you must do everything right. Offer a great product, great customer service, great ambiance and branding, and most important of all, know how to operate and run a sustainable and successful business.

Over the past 8 years I have seen an escalation of quality focused coffee bars opening up and immediately doing well. It has become even easier to differentiate yourself as a retail from your competition of other mom and pops, the chains and ... now ... Dunkin Donuts and McDonalds.

Similar to great restaurants, those retailers who focus on great customer service, professional training programs, excellent coffee and quality menu items will be in a category of their own. The silver lining is that with the exposure and customer base McDonalds has, they will for sure be selling mochas and lattes to customers who may have yet to try anything beyond a flavored coffee, and we will see the demographic of espresso beverage drinkers increase. Similar to how we sometimes thank Starbucks for broadening the market and developing new markets, McDonalds has this ability and it will happen quick.

McD's has impeccable timing as well ... with the "economic downturn" and a country obsessed now with cutting back and not spending money, the idea of saving a buck seems appealing to many. However, the consumer who is used to having a great latte each day will learn very quickly that you get what you pay for. A mocha made by an untrained barista on a super automatic machine in 44 seconds will not taste like one made from fresh roasted coffee beans, high end chocolate, fresh velvety milk from local dairy and served by a professional who understands the chain of events that coffee has traveled thru to get to that (biodegradable) to go cup.

My advice is to always serve your coffees with a goal of perfection. CHARGE MORE than Starbucks and McDonalds, as your serving a far superior product and at only $1 or so more a cup, you are still serving an affordable luxury. Let's let the big guys battle it out, but together we need to take this as an opportunity to truly separate the "specialty" coffee retailers from the caffeine slingers looking to capitalize on this high margin industry.

Would love to hear your thoughts and continue this discussion to see how the "specialty" industry, who each of us understand our markets better than a corporate giant, can educate our consumers on why they should buy from us.

- Matt

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I don't think you're talking about the same market. Indies arent just selling coffee, they're selling the whole experience. If you're going to a McDonalds, you're just slurping it down.
Do you think that eventually they will will buy out Starbucks and the two shall become one? Interesting times...
This will be very interesting to follow over the next 6 months/year. It would be nice to think that this is some kind of watershed moment in specialty coffee but we all know the intense war being waged at the budget morning mass consumer level. I think the best spin is the "gateway drug" argument. If a cheap low-quality becomes the baseline instead of cheap battery acid, then chances are greater that customers with trade up to true specialty coffee.
has anyone tried the coffee? I saw a commercial for it this morning and it said "we pick our coffee based on its flavor notes. they include, colombia, brazil and some other country I don't remember". as people in the specialty coffee industry we know this basically has no meaning. but after hearing all of this hype I am kind of curious to try it...
Well, I come out of the wood works to make my comments clear. It is truly hard for me to make this statement with out being misunderstood. I come from the Italian tradition of coffee and I understood this as a big part of my culture. I find it sometimes difficult to assume that coffee can be made any other way. For me the requirements of being into this sort of business or venture is to respect and honor the traditions that have made coffee possible. That being said when it comes to what McDonalds is doing, for me it is clear that they want to offer to their customers something more but without the price tag. When it comes the small mom and pops, I believe it comes down what i said before: carrying on tradition. So i believe it doesnt hurt the smaller shops. But for the interest of culture you may want to teach others the origins of coffee and how these drinks were made and how the play a part of the culture and its flow!

Here is a popular Sicilian proverb on coffee:

Lu cafè santiannu e lu cicculatti ripusannu.
Drink coffee while it's hot enough to make you swear but let the chocolate cool!
The only concern I have with places like Mc Donald's and Dunkin Donuts advertising themselves as specilaty coffee retailers is that there is a market that is going to be confused about what an espresso, cappuccino or latte really is. Even Starbucks, who gets credit for educating the consumer about specialty coffee, has never made a traditional cappuccino. It is very important for independent coffee shops explain the difference and continue to properly educate the consumer.
McD's, I can't believe we are actually talking about this. McD's is a great concept, I actually mentioned it here last week. Read it here.
So anyway, they have one of the best systems out there. Real coffee drinkers are not going there for coffee, and people who go there might end up in a specialty shop one day. I know I would never order coffee from McD's. I hate to say it but I would go to the green logo first. Anyway, I think they may perfect the fastest coffee first, but never the best and never the ambiance>
We've had it here in KC for a couple of years now, and regulars are surprised when I tell them it's really isn't horrible like they might think. The milk texture is better than a far too big a percentage of shops out there.

Will it have an impact on those looking for the community aspect of drinking coffee, I do not believe so. As was stated above, McCafe is slanted towards the drive-thru, and those people aren't looking for community, and so would most likely not come into a quality minded independent shop anyway. A small percentage will be swayed by the add campaign, but I believe they will come back fairly quick.
I havn't looked at every resource, but I have yet to see McDonalds using the term "Specialty Coffee", they hype it up as "sourced form certain countries" but ... that's where it grows! :)

Daren MacDonald said:
The only concern I have with places like Mc Donald's and Dunkin Donuts advertising themselves as specilaty coffee retailers is that there is a market that is going to be confused about what an espresso, cappuccino or latte really is. Even Starbucks, who gets credit for educating the consumer about specialty coffee, has never made a traditional cappuccino. It is very important for independent coffee shops explain the difference and continue to properly educate the consumer.
Oh, don't get me started on this topic! McDonald's has NO business slinging their McCrap and calling it specialty or premium coffee. As Matt mentioned, this will result in greater exposure, but I don't see the "silver lining"; this is nothing but bad news for the real specialty coffee industry. The only thing this accomplishes is a degradation and cheapening of coffee as a whole because there may be new customers, but they will expect to pay far less for those mochas and lattes and their initiation into these beverages will be with a sugary hastily-prepared cup of slop. And, McDonalds surely isn't going to do anything to shed light on or connect with origin countries.

The green aprons are scarcely better these days. As a former sbux partner and fan, I can say that there used to be a certain amount of skill required, but not anymore. In the old days, we worked on semi-auto machines; you actually had to dose, tamp, and monitor the shot. If it didn't measure up, it was pitched. Now any monkey can just push a button and you have what comes down to an upscale fast-food espresso drink. Starbucks does deserve proper credit though for developing the specialty coffee market large-scale so we all have many more opportunity today. They've just changed over the years and taken the path toward quantity over quality.

If you'll allow me a completely indulgent moment to slam McDonald's a little more, I need to get this off my chest. McDonald's is evil and largely responsible for making people around the world FAT and sick. Their food is purposefully addictive and aimed to ensnare children who don't know about proper nutrition (but their parents should!) If you have any doubts about the damage McD's does, read Fast Food Nation or see Supersize Me; it's completely repulsive. And this is the same company tromping around specialty coffee territory....are you kidding me??

I agree to let the big guys McD's and Starbucks battle it out because they are more or less in the same league. But we will all have to work extra hard to be quality-focused and educate people on how there is so much more to be appreciated and enjoyed about coffee. We definitely need to charge more and not fall into the trap of trying to compete with fast food. Although many people will be taken in by McD's prices and marketing, there are some that know better by now.

What else can we do? I think it's important to establish yourself in your community as a coffee expert. Become a coffee professional by attending trainings and conferences, host cuppings, write articles of interest for your local paper, and create a strong coffee community in your store and online. At every opportunity, help people experience coffee in a holistic way so they can develop a more refined palate. And by all means boycott the clown!!
I'm glad that Mickey-D's spent 100 million+ on advertising; it means in the long run that customers will be better educated on the product and want a better latte for the money they spend. A large corporate chain CANNOT compete with a motivated entrepreneur on service level -period. I've been on all ends of restaurant spectrum for the last 18 years and if your employees hearts aren't in it, then it's not going to work. I commonly use this analogy with my guests: "it's like going to a bar and ordering a bloody Mary, with extra olive juice, no celery stalk and just touch of Tabasco sauce and the bartender pulls your drink from a machine and asks for 7 bucks." the usual response is F$#@% that!!
I have yet visited a McCafe'. Today I will. Starbucks are the nervous one's. There will be of course consumers that will take low quality for low price. The customer entering my store will not only experience high end beverages (with latte' art, thanks to Matts training program) but also a handful of gracious passionate Barista's at their service. That cannot be matched at McCafe'. We all know that, so what's new?

Starbucks did ramp up the idea of speciality coffee for a number of years and now are flat doing so. McCafe' will be the next ramp up to distinguish again, the difference between budget and quality espresso beverages. McCafe' will re-engergize our business.

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