McDonald’s Specialty Coffee

The Specialty Coffee market is growing. Many food chains have decided to get in on the ‘premium coffee bandwagon,’ including 7-Eleven, Burger King, and Chick-Fil-A. Specialty coffee is defined as “a coffee that has no defects and has a distinctive flavor in the cup” (Ferguson). Specialty coffee, unlike a regular cup of joe, goes through a rigorous process which includes: planting and growing coffee beans in a particular region that is required for optimum growth; giving extensive care to the growth of the beans; roasting the beans to bring out ‘distinctive character’ in order to produce fresh, aromatic coffee beans; and finally, the brewing phase consists of making the coffee with the right amount of water and coffee, the right grind of bean, the perfect temperature, and taste (Ferguson). If a cup of coffee does not have all of these aspects-especially an aromatic freshness, it is not truly ‘specialty coffee’.

The Specialty Coffee market is becoming more competitive, with many food chains thinking about, or already, entering the arena-and for good reason. According to the Specialty Coffee Association of America, in 2005, 15% of the adult population in the US consumed specialty coffee on a daily basis. In 2005, a whopping 60% of the US adult population consumed specialty beverages on an ‘occasional’ basis. These numbers are compared to only 9% and 53%, respectively, in 2000. In 2005, the specialty coffee market was a $9.62 Billion market, as compared to $7.76 Billion in 2000. The industry has been continuously growing over the past decade.

Of the many food providers taking the first step into the coffee market, McDonald’s Restaurants is one of the major players. McDonald’s is doing well. According to its web site, McDonald’s stock price is at $34.70; it has doubled its annual cash dividend since 2002; its total revenue was $19,065 Million in 2004; and it prides itself on serving over 48 million customers. However, with only 15% of the market share, McDonald’s hasn’t seemed to have entirely grasped the premium coffee drinkers of America, and it hopes to do so by introducing its new ‘Premium Roast Coffee.’

Originally, the new Premium Roast Coffee was intended to be introduced in the New England market in November 2005. Due to marketing strategy differences, the McDonald’s parent company decided to postpone the coffee’s entrance until March 2006. Perplexingly, the New England market began selling the premium roast before March. As the media suggested there was a ‘mutiny’ on McDonald’s’ hands, McDonald’s denied any such thing. This presents a setback in McDonald’s’ marketing strategy because although it maintains a national advertising campaign, the New England area has been promoting the new coffee in its own region, and there may be conflicting information in the advertising.

The regional advertising in New England “will use the tagline ‘It’s good. It’s real good.'” (MacArthur). The coffee cups are made from Styrofoam, with an outer paper layer and a black lid, to create a Starbuck’s-like image. From February 28 until March 4, 2006, any consumer can walk into any McDonald’s and receive a coupon for a free 12 ounce cup of McDonald’s’ new Premium Roast Coffee (with any purchase, of course). The McDonald’s web site introduces every web surfer to the new coffee on its home page and with a click, the viewer will see an interactive image of the new beverage and such statements as:
Premium Roast Coffee is…

1. made from 100% Arabica beans, the finest coffee beans in the world!

2. richer, bolder, more robust than our previous blend…

3. accompanied by better creamer packets.

4. served in a new cup with travel-friendly dome lid.

The web site uses the tag line “Wake up and smell your life” and presents people drinking the new coffee and having revelations about their life, for example, “Halfway through his cup of Premium Roast Blend, Joe Abell realized he was a professional bull rider!” McDonald’s’ marketing strategy for the new Premium Roast Coffee implies that the coffee will wake you up…giving you revelations about your life…compelling you to “wake up and smell your life.”

McDonald’s needs to avoid any conflicting information in its advertising due to the time differences in the release of its new product. According to Kate MacArthur, author of McDonald’s Franchisees Stage Coffee Mutiny, “Len Lodish, a professor of marketing for the Wharton School of Business and vice dean for Wharton West, sees potential difficulties for McDonald’s once it rolls out its own premium blend, noting that one reason to do a national effort is to leverage the media efficiencies…it may cause them to change from a national mix to more of a regional mix of advertising.” It also needs to confront the New England franchisees for launching the product ahead of schedule, and for defying the parent company. There are a few ways these goals can be achieved.

First, McDonald’s could monetarily fine the New England owners for betraying the parent company’s wishes. This would have positive and negative effects, however. The franchisees would have to pay the fine from the profits of the restaurant, decreasing profits for not only the New England restaurants, but for the parent company as well. However, the fine imposed on the owners would reinforce that the parent company makes the decisions for McDonald’s, not the franchisee owners, and would affirm that something like this ‘mutiny’ most likely would not happen again.

Secondly, McDonald’s could keep its stance on the denial of ‘mutiny’ from the New England restaurant owners. The corporation could simply keep things as they are. As imperfect as the situation is, current advertising and current public statements seem to be working. On Badgett’s Coffee E-Journal, one consumer states, “The TV ads for the new premium roast coffee looked so good, that my husband and I stopped just to get some. We each had a large cup and loved it. I hope they don’t take it off the menu. We are not McDonald’s lovers, but will definitely stop there for coffee in the future.”

Finally, McDonald’s could (and should) merge the two advertising campaigns-its national campaign and its regional campaign-in order to avoid any conflicting information in the advertising. While doing this, McDonald’s could apologetically publicize what really happened in the early release of the coffee, stating that their denials before were premature and that the corporation wants the public to know the truth. On its web site, McDonald’s states, “Corporate responsibility is an important part of McDonald’s heritage. We have a long track record of industry leadership in community involvement, environmental protection, diversity, opportunity, and work with our suppliers to help improve their practices. We are committed to do still more to earn the trust of our customers and everyone else affected by our business.” This tactic of merging its advertising campaigns to create one logo and tagline for the item and making the public aware of what really happened in the New England market would give McDonald’s customers a reason to continue frequenting the restaurant and reinforce the values of corporate responsibility, community awareness, and trust that McDonald’s so clearly believes in.

Works Cited and Consulted

Badgett, Roger. Badgett’s Coffee E-Journal. www.aboutcoffee.net. Ã?© 2005.

Ferguson, Mike. Specialty Coffee Association of America. www.scaa.org/press_resources.asp. “Specialty Coffee Retail in the USA 2004-2005.” and “Specialty Coffee Factoids.” Visited February 28, 2006.

Green Mountain Coffee. www.greenmountaincoffee.com. �© 2005. Visited 2/28/06.

MacArthur, Kate. “McDonald’s Franchisees Stage Coffee Mutiny.” AdAge. October 28, 2005. http://141.161.89.18/faculty/homak/HomaHelpSite/WebHelp/McDonald_s_Premium_Coffee_(Shares)_AdAge_10-31-05.htm.

McDonald’s Web Site. www.mcdonalds.com. Ã?© 2006. Visited 2/28/06.

Schmeltzer, John. “McDonald’s Goes After Coffee Aficionados.” Baltimore Sun. February 28, 2006. http://www.baltimoresun.com/business/bal-bz.coffee28feb28,0,7818294.story?track=rss.

Smith, Dawn. WZZM13 News Channel Web Site. “Michigan McDonald’s Tests New Coffee.” http://www.wzzm13.com/news/grmetro_article.aspx?storyid=38576. April 11, 2005. Visited 2/28/06.

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