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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Hahahaha...gotta check that out....

Alun Evans said:
You could be right! I hear from a source that one of those roasters sitting up on the 6th floor of the Gourmet Kitchen in Bedok is the culprit in Singapores Mc D case!

Danny said:
I sense there is some local relationship market forces at work.

Alun Evans said:
Last time I was in Singapore had coffee at a McCafe over the road from the Mercure, East Coast. They had a nice looking 2 group Carimali, good grinder... but the coffee was for sure a heavily robusta-ised blend. In another McCafe they were pushing fil had some gnay looking Superauto from China at work...In NZ they only use Arabica, in Indo it is something similar to that in SIngapore. I am wondering...where is the product consistancy that they built the business on?

Danny said:
Here in Singapore, McD's rolling out a campaign telling everyone they are serving Premium Coffee (filter style). They are doing well. In a country where the majority of 5 million are still drinking 100% robusta roasted and charred with sugar, butter and corn for US$0.60 per cup, McD's marketing certainly helps. Having said that, it makes even tougher for small coffee shops who wants to focus on quality and craftsmanship to fight those with deep pockets in the near term.
MC D’s is using Bunn for their brewing equipment and Franke super autos for the espresso. Mc D’s is smart to take advantage of the faltering king SBX (soon to be king of instant coffee). We can all thank SBX for introducing the super automatic machine to the North American Market. SBX felt that by having an exclusive contract with a Swiss company called Thermoplan, for their super autos, that they would not allow the competition to replicate their SOP. The approach was tremendously naive and foolish. You can see that they have not learned from their mistakes through the purchase of the Coffee Equipment Company (The Clover) coffee brewing machine. They obviously feel that they harness the ultimate brewing technology available. This is simply not the case. I am aware of many aspects of the industry and one thing I am certain of is that there are new brewing and beverage preparation technologies on their way to market in the next 12 months that will help the independents truly separate themselves from the chains. I know for a fact that these technologies will only be available for independent shop owners. No selling out to SBX. This is what the industry needs, true innovation with the independent in mind.

Innovation in needed in the industry now more than ever. In reality the industry has gotten stale. Innovation has not been innovation but rather an adaptation of preexisting beverages and technologies with slick marketing campaigns. Look at SBX’s “Tea Latte” which was made by steaming tea with milk. It’s not a tea latte, its steamed milk with powdered tea. Look at the typical chai latte, where the tea flavor and spices come from a carton then are mixed with milk. SBX was not the first to heat milk and tea together and the first combination of Chai tea and Milk was not created in Oregon! Again, not innovation but adaptation.

This is the point in time where we the independent shop owners, baristas, aficionados, and roasters must be actively striving to change the way we operated, create and innovate. Time to cut out short cuts and lazy interpretations of true product.

If you have a super auto, get rid of it and buy a traditional machine.

If you have bag tea, scrap it and find a loose tea supplier.

If you use pods, get a grinder.

If you have premixed blender drinks, go buy some fruit.

If you have a self tamping and dosing grinder, sell it and buy a grinder and learn how to tamp.

If you have chai latte mix (I know most of you do) pour it out and make your own chai base and stick it in the fridge. If you don’t know how I would be happy to tell you.

I know that at this point in time the idea of changing anything you do is scary. However, all of these elements are more important now than ever. The only way to survive is to create a clear separation.

Don’t be generic be original. That is something that cannot be replicated.
it definitely appeals to a certain market segment, although I feel that the market segment that frequent independent coffee shops would not be swayed to try a McCafe. And perhaps those who would go to McCafes would not visit ICSs. McCafe are entering the pie of Starbucks, Peets etc

It will be interesting to see the quality of beverages, and the extent of their education and that which they are educating the general public. It isn't like they are going to have a West Africa single origin cupping in their store, nor will they be competing at local competitions or representing in the USBC.

As much as Starbucks has been criticized, they were the catalyst in the coffee industry in this country. They offered a certain way to do it, and those who dared to try a higher quality and independent view were able to reap the rewards of the ICSs or the specialty coffee industry. McCafe will offer an experience (it may be drive through or not what you and I have in mind as a desirable experience), but it will allow others to taste, and be intrigued, and then hopefully want to explore the world of better quality, highly specialized baristas, and a completely different experience that the specialty coffee world is offering.
I haven't followed the 5 pages of discussion, however I'd like to post about McCafe in Australia.

I'm sure most people know that Australia is a 100% espresso market, i.e. unlike Northern America, we do not serve filter coffee unless in hotels and convention centres where mass people need to be served in record time.

In Australia, McD's serves 100% RFA certified coffee through a range of super autos and automatic espresso machines. From what I can see, their effect on local coffee houses and cafes is minimal, there are rarely people queuing up for their cappuccinos and cafe lattes. In fact, a few years ago I worked in a cafe that was literally next door to a McCafe, brand new shop and by the 2nd week we were in operation we were already hitting our straps at 40kg a week.

Cafe owners need not be scared. It's probably a good thing that McD's is mass marketing espresso, getting the masses to distinguish a quality cup will be the main task.
mike brought home a mc latte. I tried it. it was gross. really gross. nuff said.
This is definitely interesting. In a post below someone suggested a McDonald's and a Starbucks merger. McStarbucks. Ha! Has a ring to it. Anyway, independents, not to worry. In Southern California we have a "smaller" burger chain, called "In 'n Out". They only serve hamburgers, cheesburgers, cokes and milkshakes. They smoke McDonald's in all areas of QSC. They always have lines out the door in the Drive Thru and in the store. You can visit an "In 'n Out" at midnight and there could be a line of 12 to sometimes 20 cars. Independents just have to create a phenomena in their product and service, while sticking to the basics. Make the perfect hand crafted beverage. Don't compromise on quality and create the entire experience. McDonalds can't cookie cut the total Cafe experience. They can't even provide the same service. They have dirty stores and the drink process is disgusting. If you ask how they make their so called cold coffee you will be shocked. The advertising can only help our business and create new customers. A new customer can try a drink at McDonald's and think "I should finally give that Cafe a try" - and poof you have a new customer!
Nicely said.

Matthew Kenny said:
it definitely appeals to a certain market segment, although I feel that the market segment that frequent independent coffee shops would not be swayed to try a McCafe. And perhaps those who would go to McCafes would not visit ICSs. McCafe are entering the pie of Starbucks, Peets etc

It will be interesting to see the quality of beverages, and the extent of their education and that which they are educating the general public. It isn't like they are going to have a West Africa single origin cupping in their store, nor will they be competing at local competitions or representing in the USBC.

As much as Starbucks has been criticized, they were the catalyst in the coffee industry in this country. They offered a certain way to do it, and those who dared to try a higher quality and independent view were able to reap the rewards of the ICSs or the specialty coffee industry. McCafe will offer an experience (it may be drive through or not what you and I have in mind as a desirable experience), but it will allow others to taste, and be intrigued, and then hopefully want to explore the world of better quality, highly specialized baristas, and a completely different experience that the specialty coffee world is offering.
I personally think it's kind of adorable. To me it's just like their "red box" for renting films. It sacrifices tradition, experience, quality and personality for convience and novelty. I think that those that partake in this "McCafe" endeavor will fall under two categories. Those who normally order trash black coffee from them before and will continue to order a lower quality beverage, and those whose interests will be sparked enough to actually begin to care about the SCI. How far they progress into our moderately peaceful lil' world will partially be up to them, but is also up to us to push our game the farthest we can, both in quality and in a holistic sense. Many a good point has been made in this discussion, but when it comes down to it, we, as baristi, simply need to stay focused, educated and passionate. And I really wish they'd stop starting every one of their endeavors with the first two letters of my last name. Gettin old haha.
While McDonald's may offer "coffee" at a cheaper price, they pay a heavy price in eliminating everything the coffee community is about. True coffee people want knowledgeable, intelligent, and capable baristas making their drinks. In fact in Milledgeville, where I am currently living, the McCafe has been using the tag line of "try a mocha latte cappuccino". Anyone with any sort of even vague coffee knowledge would know that these three items are totally conceptually different. If the McCafe wants to survive, it needs to stop making a mockery out of what the coffee community truly is.
I think the people that regularly go to McDonald's are equivalent to drip coffee drinkers--you know, the folks that will drink 3-4 cups of coffee at home, then go to your shop and order a drip with cream and sugar. They want what they want, and they'll have it cheap. I don't think we can win them over. We as an industry can only serve those who want to be served. It's hard enough to convince people like that the rewards of ordering a single origin on the Clover, so I think McDonald's has already won more than half of the clientele they were seeking.

Also, most people have a general idea of what espresso is. Rather, most people have a general idea what they're USED to espresso being: "strong", bitter, watery coffee spit. So naturally, McDonald's probably isn't going to sell any drinks that aren't flavored with some sort of syrup, or sugarred- down with some sort of corn syrup gunk. Again, we're talking about a customer base that probably will never venture into an indie shop.

On a side note, our shop owner was talking to one of the espresso techs in town, and he was speaking of the horrors of a recent McDonald's espresso machine service he did: Apparently they have some crazy automatic brown milk-encrusted tubes in them that takes milk and heats it to like 170, and they don't clean it! So consider the crusty latte next time you see those golden arches.
true true. the one cafe i work at is across the street from mcdonalds, & i have had countless!! people come in after getting a latte thru the mcdonalds drive thru, to get a "good drink" from us... even tho i know its crappy, i still feel a wee bit guilty dumping out coffee... haha just seems wrong :) but yes, thank you mcdonalds, you've increased our daily sales (& tips!!)
I agree let the big boys and their totally automatic machines battle it out. I will do my best to take advantage of their advertising about specialty coffee. I will continue to promote customer service through the process of doing our coffee without super automatics and having my Barista trained to produce the highest quality drinks we can.

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