The (Burger) World Is Not Enough for McDonald's

Not Content With Dominating Fast-Food Competition, Chain Makes a Move to Best Starbucks, Dunkin', Others

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NEW YORK ( -- As if drubbing the hamburger competition wasn't enough, McDonald's selected a number of non-carbonated beverage opportunities built up by a handful of chains and has built respectable facsimiles of all of them. Now armed with everything from lattes to smoothies, McDonald's is ready to fight for a bigger piece of the $153 billion U.S. beverage market. In addition to quality products, McDonald's boasts 14,000 locations and $1.2 billion in U.S. advertising spending, as estimated by Ad Age.

"McDonald's clearly wants to become more of a beverage destination," said John Sicher, editor and publisher of Beverage Digest. "McDonald's franchisees have been unhappy in years past seeing consumers bring in beverages from convenience stores either into their restaurants, or seeing them in cars go through the drive-thru."

Next month, McDonald's will roll out smoothies, which it has been testing for more than a year, with national advertising. The products follow lattes, cappuccinos, hot cocoa and frappes, McDonald's take on Starbucks' iconic Frappuccino.

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Ice blended coffee is a $3.2 billion category in the U.S., according to Study Logic, and Frappuccino (including the company's bottled drinks) is a $2 billion brand for Starbucks.

And the segment stands to grow with wider availability and national advertising -- even if it's from McDonald's.

"Especially when you're a major player that does a lot of advertising and promotion of the product, it really does generate increased awareness, and there's a halo effect," said NPD industry analyst Bonnie Riggs. "It reminds consumers of the products, and they not only order it from the chain, but they order it elsewhere as well."

Now McDonald's is eyeing additional growth areas like frozen juice blends, with a test of frozen strawberry lemonade in a handful of markets, including Michigan and Austin.

These drinks have been a staple of Sonic's success.

"From the very beginning, it was a holistic approach to the beverage category," Alex Conti, senior director-menu management at McDonald's USA, said of the multiyear initiative that has brought the bevy of beverages to U.S. restaurants. "With some things we thought we first had to build up our credibility."

For instance, the chain launched its upgraded premium roast coffee years in advance of its once-pilloried latte push. The beverages, which compete with Starbucks, have since proven accretive to McDonald's sales.  

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