What’s the fastest-growing coffee brand in Canada? If you guessed market leader Tim Hortons, which sells eight of every 10 cups of coffee sold in this country, you guessed wrong. The answer: a revitalized McDonald’s.
The great McDonald’s turnaround was built on coffee, wrote James Cowan:
The most meaningful way to connect with diners in this country? Coffee. On any given day, almost half the population visits a restaurant, according to the NPD Group, a market research firm. The No. 1 item is coffee, with two billion cups consumed every year. Yet McDonald’s share of the market was “tiny” before [CEO John] Betts arrived, according to Robert Carter, NPD’s executive director of food service. “What McDonald’s did was make a strategic decision to focus on that core item,” says Carter. “It was a way to really connect—it gave Canadians a reason to visit.”
The world’s #1 fast food chain is gaining a foothold in the quick-serve coffee market, so it’s turning it sights to the cuppas that consumers make in their homes. In association with Kraft Canada, McDonald’s is taking its coffee to the grocery aisles—McCafé Premium Roast as well as single-serve cups for TASSIMO and Keurig will be available at major retailers on September 29 and at the company’s outlets from October 6.
Coffee is the most-ordered item outside the home after water, according to McDonald’s Canada President and CEO John Betts, who discussed the company’s move into the grocery coffee space.
Canadian Business: Why retail?
John Betts: I think it’s a culmination of all the great work we’ve done reconnecting with Canadian customers. In 2008 we started to turn our business around with a cup of coffee. It’s really the thing in Canada that connects with Canadians more than anything. In 2008, McDonald’s wasn’t even a part of the conversation—nobody talked about our coffee and our operators had a passion for doing that.
After tripling our coffee sales over the last five years and doubling our share we had been getting requests from our guests for several years [for coffee in grocery stores]. Interestingly enough the grocers started to contact us over the last several years, so they’re obviously hearing from their customers about what kind of products they want in stores.
Are you worried at all that this will cannibalize coffee sales in restaurants?
Here in Canada with about two-thirds of coffee consumption at home, I’d rather have our brand in the kitchens, in the cupboards, in the dining rooms because it’s not there today. If anything I think because of the quality of the product that we’ve been serving and growing our business with, it will enhance our experience, and it will make McCafé awareness very high.
Are you worried that this will be seen as a me-too move? Starbucks and Tims are already offering their coffee at grocery stores.
I’ve been in the business for 44 years and I learned long ago to focus on what you can control. It starts by listening to what your guests are asking for and our guests have been asking for this. Whether there’s others out there that have done this for a long time is not our concern.
To be honest, we’re not experts in this. That’s why we’ve partnered with Kraft, who I think are the absolute best when it comes to merchandising, introducing and the relationships that they have with grocers.
When you talk about it from a share standpoint, we’ve grown our coffee share more than everybody else put together over the last five years, even though our experience has not expanded significantly at all. That’s why the grocers have contacted us.
Are we going to see other McDonald’s products in grocery stores?
I would never say never. I suspect if we’re as successful as we’d like to be with this, who knows what else we might be able to offer? But I think we have to focus right now on having a fantastic launch. For now, let’s focus on the coffee, and that’s really how we’ve approached our business in the last few years. It’s been about the coffee, it’s been about an extended menu, probably the most interesting and diverse menu in my 44 year career, and contemporary to boot.