McDonald's Tests Oatmeal in Washington Area

Trial Takes a Page From Starbuck's Successful Breakfast Playbook

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CHICAGO ( -- Want a side of oatmeal with that Egg McMuffin?

McDonald's Corp. has begun selling oatmeal at restaurants in Baltimore and Washington, as it looks to take a page from the playbook of rival Starbucks Corp., according to a report from Crain's Chicago Business.

McDonald's maple brown sugar oatmeal, which sells for $1.99, is topped with apples, raisins and cranberries and blended with cream.

A spokeswoman for the fast-food giant said oatmeal has been "well-received by customers," but the chain has not decided whether it will expand the test to other markets or offer the item on menus nationwide.

Seattle-based Starbucks introduced hot breakfast sandwiches in 2005, taking aim at a fast-food segment that McDonald's has traditionally dominated; breakfast is also McDonald's most profitable meal.

When Starbucks launched oatmeal in the fall of 2008, it quickly became the coffee chain's top-selling breakfast food.

Analysts say McDonald's is looking to generate the same boost, as its breakfast sales are faltering in the face of high unemployment, which means fewer commuters are looking for a quick and cheap breakfast on the way to work.

"The battle for breakfast is intensifying," said R.J. Hottovy, an analyst in Chicago at Morningstar. "Oatmeal really helped Starbucks, and McDonald's is looking to reinvigorate its breakfast sales."

McDonald's launched the Dollar Menu at breakfast earlier this year, as its U.S. same-store sales have declined three out of the last four months. It also plans to soon add frappes and smoothies to join the lattes and cappuccinos it introduced last year.

On another competitive front, Burger King recently announced it will begin carrying Starbuck's Seattle's Best Coffee in its restaurants as it tries to improve its morning offerings. It previously carried coffee provided by Sara Lee Corp.

"Clearly, there is an increasing focus on breakfast and trying to win market share as traffic slows," says Larry Miller, an analyst in Atlanta at RBC Capital Markets. "Oatmeal would be an easy product for McDonald's to execute, and it makes sense."

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