Is McDonald's "McCafe" concept actually producing greater profits?

I humbly admit that when when I am traveling on the road I will stop at a McDonalds for lunch.

That being said, I see that every one I go to has a McCafe coffee bar that I presume is intended to compete with Starbucks. However, my casual observation suggests that the customers are ordering the usual menu items and/or the soft serve desert treats. I haven’t observed them ordering the frappe’s and cappuccino’s.

It the McCafe thing really a profit generator? It seems like an expensive waste of valuable retail space from what I’ve observed. Does anyone have the Straight Dope on whether this concept is a success or another marketing failure?

P.S. The McDonald’s coffee has gotten better. It used to be just raw brown steam in a cup.

I just read an article today saying that the cold drinks were doing really well but the hot drinks weren’t. Probably in Crain’s Chicago business, but I can’t be arsed to google it myself.

It says here:

Compared to the competition, McDonald’s sales grew more than Burger King and Yum (Pizza Hut/Taco Bell/KFC) while Wendy’s/Arby’s and Jack In The Box sales actually dropped.

I refuse to eat at MacDonald’s, but they really push McCafes hard here. I think they’re doing well.

McDonalds is well known for doing trials. They are also known for not keeping anything that isn’t profitable. So if it ain’t profitable it’ll be gone soon enough

That said, Marketwatch (dot) Com reports the frappes and its McCafe to be successful so far and already beyond expectations. Now that could really be meaningless. I mean if you expect nothing it’s not hard to beat expectations.

And Resturaunt World says (as did another poster) the cold drink line is a huge hit while the hot beverages are holding their own.

So time will tell :slight_smile:

Well I hope the sweet tea is profitable, because I’ll cry if it goes the way of the McRib. I’m hoping to see it sold at grocery stores in large containers one day. It kicks Snapple and Arizona’s ass.

Hasn’t the McCafe thing been around for a while now? I could swear I’ve seen them for like five years.

The Economist has an article today on “The changes facing fast food”.

It says:

Companies are also trying to get customers to buy new and more items, including drinks. McDonald’s started selling better coffee as a challenge to Starbucks. Its “McCafé” line now accounts for an estimated 6% of sales in America. Others are testing a similar strategy. Starbucks has sold rights to its Seattle’s Best coffee brand to Burger King, which will start selling it later this year. McDonald’s is now rolling out frappé coffees and smoothies.

It’s been round for like forever in Australia, a market in which the inability of McDonald’s* to serve a drinkable coffee is a pretty significant handicap. If memory serves me, the concept was developed for Australia and did help to ameliorate their acute coffee problem. It was later rolled out in a number of other countries, but only made it to the U.S. fairly late in the day.

*Or, for that matter, Starbucks.

Canada here. I’ve never seen a “McCafe” or similar. Can somebody explain?

In the McDonalds I have seen in the US they have made a modification to the stores to carve out an area next to the cash registers. There are overhead signs designating “McCafe”. You will see coffee machines and signs promoting frappes, cappuccino. etc. It’s sort of a trailer park Starbucks approach to selling premium coffee drinks.

As I said in the OP, I don’t see people ordering the stuff buy my anecdotal survey is totally unscientific. Maybe the concept is profitable but I don’t quite see it. That’s why I submitted the OP.

And given that most McDonald’s in Australia have a McCafe, and Starbucks in Australia pretty much failed (they closed more than half the outlets), they’re clearly profitable for the Australian market. How that translates to the US I don’t know - it may depend on location within the US.

Starbucks was never really the issue in Australia; Starbucks was never a big player and, in any event, McCafe may in fact predate Starbucks’ entry into the Australian market. What McDonalds was and is up against was not a strong brand like Starbucks but a much more diverse, decentralised and sophisticated café market.

The point in Australia may not be whether the McCafe counters are profitable in themselves; it may be that unless an outlet has a McCafe counter, there’ll be a fall-off in business at the main counter.

Two issues:

I don’t eat McFood but my daughter and her friends do, and I will bring them there. (They are not yet at an age where they can go by themselves.) I won’t bring them there, though, unless there is a McCafe counter so I can at least while away the tedium with a tolerable coffee. That gives McDonalds outlets with McCafe counter an edge over those without, and over the rival fast food joints. I can’t image that the margin on my long black contributes much to the McDonalds bottom line, but all the sales to my daughter and her over-excited friends depend on the McCafe outlet. And, from talking to other Mums and Dads, I am not alone.

When teenagers reach an age at which carbonated sweetened water becomes uncool, they switch to coffee. But, for at least a proportion of them, the regular McDonalds brown-water-with-grit either tastes revolting, or is equally uncool. Hence they have to be offered a McCafe option, or they may forsake fast food joints.

In short, my suspicion is that the volume of sales through McCafe counters may be quite small, but the presence of the counters plays an important role in positioning McDonald’s in the marketplace.

I didn’t mean to imply in my post that McCafe was in competition with Starbucks and pushed it out - more that the fact that Starbucks failed demonstrates that the Australian coffee market may be difficult to get a substantial foothold in (for the reasons you mentioned). This suggests McCafe must be doing something right.

The point you make about the appeal it adds for parents is an interesting idea for what that ‘something’ could be.

I’d bet that most of the coffee is ordered in the morning or via the drive-thru.

I’ll grab a McCafe latte from the drive-thru if I’m grabbing an egg mcmuffin for breakfast. I prefer a better quality one from Starbucks or Caribou but don’t want to make two stops.
I’d put the McCafe latte on par with the ones you get at Super America or Holiday.

They have some in Toronto, at least. It’s just an expanded McDonald’s that sells coffee shop-type drinks as well.

I haven’t tried any of the McCafe items (I don’t like coffee) but I have to say that McD’s new shakes are greatly improved.

Only relative to Starbucks. McCafe is the largest coffee shop chain in Australia, but that statement needs to be put in context; we don’t go in for large coffee shop chais. From memory, only 6% of Australian cafes are chains or franchises; the remaining 94% are independently owned and branded. Thus being the largest coffee shop chain doesn’t indicate the kind of market dominance that it might in other markets.

As I say, I suspect that volumes of sale in McCafes may not be all that high. I’d be interested to know what percentage of total Australian prepared cofee sales takes place through McCafes, but I doubt that information is available.

I’d think that the coffee sales would occur at times outside of the lunch and dinner rushes. If true, even a small profit would be worthwhile during those times just for the extra foot traffic.