Franchise Talk

McD’s fancy drinks by 2009; sees $1-billion sales boost

October 2nd, 2007 | Author: Jack

In one of its biggest strategic moves ever, McDonald’s Corp. plans to sell lattes, cappuccinos and other specialty drinks in all of its 14,000 U.S. restaurants next year.

McDonald’s predicts the new drinks will add more than $1 billion a year to sales, according to planning documents obtained by Crain’s. The drinks also will require the most extensive revamping of restaurants this decade.

The move is a frontal assault on Starbucks Corp., which dominates the fast-growing and highly profitable premium beverage business, as the world’s biggest burger chain tries to turn itself into a Starbucks-style destination for customers looking for something to drink.

In memos outlining the plan, McDonald’s estimates the U.S. beverage market at $60 billion a year, calling it “one of the largest growth opportunities” for the company in the United States.

“They are placing a lot of chips on this beverage plan,” says Larry Miller, an analyst in Atlanta with RBC Capital Markets. “It is a great opportunity, but it really depends on how much it will cost.

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