McCafe Leverages McDonald’s Reach in Canada Taking on Starbucks

November 23rd, 2011 by Trefis Team
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As part of its global expansion strategy, McDonald’s (NYSE:MCD) recently launched the McCafe brand in Canada. [1] McCafe is a subsidiary of McDonald’s which was initially launched in Australia in the year 1993. Since then, the brand has been expanding to other countries of which Canada is the latest. The brand  focuses primarily on coffee and coffee based drinks and with this move, it places McCafe in direct competition with Starbucks (NYSE:SBUX), Second Cup, Coffee Time and Tim Hortons (NYSE:THI).

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McCafe Leverages McDonald’s Reach to Take on Starbucks

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Presently, almost 900 McDonald’s restaurants in Canada carry McCafe espresso based beverages. McDonald’s has close to 1,400 restaurants in Canada, the majority of which would serve McCafe espresso beverages by the end of 2012.

The McCafe menu includes specialty coffee based drinks like Mocha, Americanos, Lattes and Cappuccinos. McDonald’s hopes to attract significant number of consumers to try these specialty drinks who otherwise might find brands like Starbucks too expensive. McDonald’s believes that its excellent store network, marketing muscle and highly efficient supply chain will help in the overall success of McCafe in Canada.

Specialty coffees also have a higher EBITDA margin than the regular ones and hence the sale of higher proportion of these might help in improving the overall EBITDA margin for the company.

Besides Canada, McDonald’s is also looking to double the coffee sales in Germany by 2015. The company will also spend $2.9 billion in 2012 to open 1300 new restaurants and upgrade its 2400 existing restaurants. (Read more on this in our previous article, McDonald’s Updates: October Sales Show Expansion Plans Are Paying Off)

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Notes:
  1. McDonald’s taking on Starbucks in Specialty Coffee Segment, Vancouver Sun, November 7, 2011 [↩]