McDonald's Corp. will announce today that its long-awaited, full-tilt entrance into the $11 billion-plus U.S. retail coffee market will take place early next year when it rolls out McCafé coffee in ground, whole-bean and single-cup forms through a partnership with Kraft.
"We think this will increase the awareness of the McCafé brand beyond its current in-restaurant strength and that will encourage more people to try it. I think it allows us to tap into that very large base of coffee drinkers who now make their coffee at home. This will give us access to them as well," Greg Watson, SVP, McDonald's U.S. Menu Innovation told BurgerBusiness.com.
Retail coffee is hardly an inconsequential market. Data from Statista shows that the average American adult spent $21.32 a week on coffee in 2013. Packaged Facts estimates that 77 percent of the market ($37 billion) is coffee consumed at foodservice. That leaves 23 percent or an $11.2 billion market for coffee sold at retail. McDonald's could use a nice chunk of that market.
Kraft has "been a wonderful partner in this process. They bring deep coffee expertise and a great distribution network and manufacturing capabilities," Watson said. "It's a strong marriage between the two brands." McDonald's gave away McCafé coffee over a two-week period ended April 13 this year to increase awareness and trial and to blunt Taco Bell's introduction of a breakfast menu.
In Oct. 2012 BurgerBusiness.com was the first to report that McDonald's had trademarked its McCafé name for whole bean and ground coffee. It began selling McCafé coffee in Canada in November 2012. Earlier this year, McDonald's began testing the bagged coffee at a few supermarkets.
Packaged in 12-oz. bags, McCafé will be offered ground in Premium Roast, Breakfast Blend, French Roast, Colombian, Premium Roast Decaf and French Vanilla and Hazelnut plus a French Roast Whole Bean. Watson said he expects pricing to be roughly the same as the $7.29 for a 12-oz. bag at which it was sold in the test markets.
Single-Cup (pod) coffee will be offered in Premium Roast, French Roast and Premium Roast Decaf varieties. Mintel reports U.S. consumers bought $3.1 billion worth of coffee pods in 2013, compared with $132 million in 2008. One-quarter of Americans now own single-serve brewing systems such as the Keurig. Other foodservice brands--including Starbucks, Tim Hortons, Dunkin' Donuts and Krispy Kreme--already market their coffee in pods as well as ground.
Packaging (shown above) developed for the U.S. tests and different than that used in Canada will be used for the national rollout. "We found strong acceptance of that package and we think it really represents the brand well," Watson said.
Premium Roast--the coffee served in McDonald's restaurants--was the top seller during the test marketing, but it did not cannibalize restaurant sales. "In our test we didn't see any impact on our restaurant coffee business," Watson said. Availability won't be national from any one day on, he said. Rather there will be a rollout to stores within a short time frame early in 2015.
Initially, the bagged McCafé coffees will be sold only through grocery, mass merchandise, club and drug retailers and will be not be available in McDonald's restaurants. Asked if that might change down the road, Watson said, "We'll continue to look at that; it is definitely a possibility for the future."
Asked how many pounds of McCafé coffee McDonald's hopes to sell in 2015, Watson said simply, "Lots."