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McDonald's Unleashes Summer Sales Weapon: Beverages

Ahead of National Advertising, Chain Is Finding Success -- and Unexpected Customers -- With Line of Frappes, Smoothies

By Published on . 4

CHICAGO (AdAge.com) -- Burgers, schmurgers: This summer at McDonald's, the focus is on beverages. The chain is launching frappes and smoothies by way of its McCafe line and sales are surging -- even before the national advertising, which officially launches this week.

The entire line of beverages, including lattes and cappuccinos is expected to add about $125,000 to each restaurant's annual sales and $1 billion to McDonald's bottom line. It's a good thing, too, because new equipment and remodeling costs ran up to $100,000 per restaurant, although McDonald's kicked in a portion of the cost.

McDonald's coffee drink is a cheaper alternative to Starbucks.
McDonald's coffee drink is a cheaper alternative to Starbucks. Credit: Tim Klein

So far, McDonald's has said the McCafe drinks are on pace with that goal. In May, the chain credited frappes as part of the reason for a 3.4% increase in U.S. same-store sales. Smoothies are also selling ahead of expectations, McDonald's spokeswoman Danya Proud confirmed. So much so that the chain recently asked exuberant franchisees to curtail promotions in advance of launch.

While the drinks are well-known among urbanites, they have yet to catch on in the mass market. One sticking point may have been one of availability. Now McDonald's is putting them in 14,000 U.S. locations and throwing the switch on its $1.2 billion U.S. advertising spending. Another is a lack of knowledge about the products. And so the chain is beginning another education campaign, having spent much of last spring explaining the latte. Ads from DDB Chicago, depicts berries and yogurt going into a blender to create a "real fruit smoothie."

Women seem the most likely target for these sweet drinks, and McDonald's has undertaken a variety of initiatives in recent years to woo them into restaurants or entice them to buy something for themselves while making a stop for the kids. Ad Age decided to stop by a downtown Chicago location, and get a sense of who is buying the new beverages and why.

"The idea has been to do as much visible and audible advertising as possible," said franchisee Nick Karavitis, pointing to signs on the menu board and recorded messages that greet customers in the drive-thru, saying, for instance, "We now have smoothies and frappes." But once national advertising starts, he predicts sales will go through the roof.

It's not just women, though, a number of men confessed to be fans. A young man who identified himself as Matt Blank said he was drinking his eighth frappe and had gotten hooked on the sweet concoctions. He was unable, though, to convince companion Naomi Garcia to even have a sip. Ms. Garcia, who described herself as "basically vegan," had insisted they visit Starbucks next. "I trust their food," she said.

But the smoothies seemed to be enticing a few vegetarians to the home of Big Mac. Two women, Saman Sheikh and Trina Wolfson, separately confided that they hadn't been to McDonald's in years. They each ordered fries to go with their smoothies, apparently not realizing the fries are flavored with beef.

A mother and son visiting from Albuquerque praised the smoothies. Becky Burrage said she makes smoothies at home, but was pleased with the product.

Not everyone was as complimentary of the frappes. Kate Falardeau, who said she was having her first lunch at McDonald's in years, had also ordered her first mocha frappe. "It's more like a milkshake," she said. "And I wanted something that tasted like coffee."

But Taylor Shaw, an area high-school student, said she was enjoying her caramel frappe. And while she'd had the similar product at Starbucks, she said the McDonald's version had saved her money, which was going toward a purse she was going to buy at Water Tower Place.

Another important aspect of the premium beverages is the ability to build business in off-peak times. While the drinks are an easy upgrade from a coffee or soda, smoothies and frappes also fit the bill for a late-morning or mid-afternoon snack. The fast-food industry has worked hard to drive traffic in middling hours, with items like snack wraps. Mr. Karavitis noted that the drinks also do well in the evening, as dessert or even a late-night snack.

Now the problem for McDonald's is what to do about the tired-by-comparison triple-thick milkshakes. The chain is working to add a premium touch to the drinks, serving them in clear McCafe cups and adding whipped cream and a cherry. The chain is also working on a number of trendier shake flavors and styles. The Chicago and State location was serving a take on an orange-sherbet shake with striated layers of white and orange.

And get ready Sonic: the McSmoothie machine is already equipped with a button for ice-blended strawberry lemonade. The drink itself is still in test, in a handful of markets, including Michigan and Austin, Texas.

Our Reporter Learns to Leave Drink-Making to the Experts

So if I can break stories about McDonald's marketing, I ought to be able to make one of its smoothies, right? Not so much. After a few highly supervised minutes operating its state-of the art ice-blended-drink machine, McDonald's spokeswoman Danya Proud told me, "Don't quit your day job."

Credit: Tim Klein

McDonald's employs a drink specialist to run the two machines that make its espresso-based and ice-blended drinks. In a very short stint just before the lunch rush last Thursday, I learned how to make a smoothie and a frappe.

The first thing is to grab the pitcher, which gets inverted and washed after each use, and fit it under the drink chute. Now select the drink and the size on the touch screen. Check! Since the machine adds and measures each ingredient by weight, the actual preparation is pretty foolproof. For a smoothie, it draws pre-made smoothie mix and frozen yogurt from drawers beneath the counter, and adds ice.

Now comes the hard part: grabbing a plastic cup from the bays overhead. Not easy if you're 5' 2," and even harder if you use any pressure, which I did. Luckily, the owner-operator was on hand to do it for me. Smoothies are served without toppings. But on the subsequent frappe, I really got to shine: covering the top with a layer of whipped cream was done in only two tries. Then I drizzled the top with chocolate sauce and added a lid without sticking my finger through.

Now, back to my day job.
--Emily Bryson York

What People Are Saying About the New Products

Saman Sheikh

Saman Sheikh
Saman Sheikh Credit: Tim Klein
This Chicago-based journalist said she hadn't visited a McDonald's in years. "I try to eat healthy," she said, and that includes a vegetarian diet. She cited concerns about the company's treatment of animals. "I really think they should rethink their practices," she said. (Franchisee Nick Karavitis said smoothies are giving McDonald's a chance to combat commonly-held misperceptions about the food and how it's made.)



Taylor Shaw

Taylor Shaw
Taylor Shaw Credit: Tim Klein
This high-school student from the Western suburbs stopped at McDonald's with friends and had a caramel frappe. She'd had Starbucks' version, but said she wanted to save money for a new purse. Darren Tristano, exec VP of Technomic, said that millennials are a solid target for ice-blended drinks because they had more options (read: fewer milkshakes) while growing up. Smoothies, he said, "taste good and the flavors are going to be appealing and there's a healthful association." Freshness is another bonus, he said, as well we the ability to offer a variety of flavors.

Matt Blank

Matt Blank
Matt Blank Credit: Tim Klein
If McCafé drinks primarily appeal to women, their charms aren't entirely lost on men. Mr. Blank stopped in for what he said was his eighth frappe. "I'm hooked," he said. Mr. Tristano said to expect a lot of men with McCafés. The drinks are "a natural for men who want something cold and tasty." Companion Naomi Garcia was having none of it. "I'm going to Starbucks," she said.
--Emily Bryson York

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