11/20/2015
Marketing Channel
MAR 4203

Raquel Eskenazi 3997201
Michael Perera 3004721
Mauricio Etienne 4932817
Antonio Kiriakov 5361314
Kevin Hodgeson 3964446
Andres Lacayo 3342194

1. Is McDonald’s trade-up strategy to the McCafe line of premium coffee products a good deal for the franchisees? Why or why not?

The McDonald’s strategic initiative to bring full range of coffee products into its franchisees to all its US stores, created large amount of excitement to the restaurant industry and the press as well. Bringing new line of coffee products would mean direct competition with the primarily competitors; Starbucks and Dunkin Donuts. In reality what really mattered to all those 14,000 franchisees was whether the new line of premium coffee products would be a good thing for them. Either winning or losing from the franchisers point of view was all about whether the new McCafe product trade-up strategy would bring more sales and profits to their stores. Even though there is a lot of talk in the press and it has been largely discussed by store owner, I believe that McDonalds trade-up strategy would be successful. McDonalds is a brand that has been accepted by all Americans, furthermore it is brand that is mostly visited by the Middle Class of people. Furthermore the expectations are that McCaffee premium coffee products would add an average of $125,000 in additional revenue per store; the premium coffee products will also attract more off-peak customers. Other than all this McDonalds products are more price competitive than the major competitor for the market share – Starbucks. If quality is satisfying most of Americans would rather pay less than pay more, therefore McDonalds trade-up strategy would most likely be successful.

2. If McDonald’s McCafe premium coffee trade-up strategy turns out to be highly successful, do you think other fast-food restaurants such as Burger King and Wendy’s will pursue a similar coffee trade-up strategy?

In the past couple of years, fast food restaurants have shifted their focus on to the breakfast meal. They recognize that this is often the only meal people may choose to eat out during the week. Coffee is a key component to breakfast, and the success of Starbucks and McCafe have indicated that people are no longer satisfied with a basic cup of black coffee; they want gourmet options. Offering only two coffee options—caffeinated and de-caffeinated—is no longer enough to ensure a fast food restaurant is competitive for breakfast. In 2013, a few years after McDonald’s launched McCafe, Burger King announced that they would be doubling the number of coffee beverages they would sell in partnership with Seattle’s Best Coffee (Horovitz 2013). It seems that many fast food restaurants have already chosen to follow McDonald’s lead.

While restaurants like Burger King and Wendy’s may feel pressure to compete with McDonald’s, pursuing the gourmet coffee strategy may be difficult by this point. Starbucks, Dunkin Donuts, and McDonald’s have already solidified their role as specialty coffee giants. Fast food restaurants’ new coffee additions may not be enough to entice new customers who, by now, are already loyal to one of the other brands. Burger King and Wendy’s will have to pursue a unique strategy or brand angle in order to compete with the current giants, much like Taco Bell’s recent decision to add common breakfast ingredients such as eggs, cheese, and ham, to taco and burrito menu items to appeal to the breakfast crowd.

3.In the long run, do you believe that Starbucks will be McDonald’s main competitor in the premium coffee products category? Why or why not? How about Dunkin Donuts as a key competitor? Be sure to consider the implications of question #2 in your answer to the present question.

In the long run I believe that Wendy’s will be McDonalds’ true, main competitor. While Starbucks will indeed have a large share of the market, they have a different customer base. Starbucks customers prefer a higher quality coffee and also more of a coffee shop atmosphere, which is not provided by McDonalds. It should also be know that the type of customer that is having a caramel macchiato from Starbucks in the morning, would not be found at McDonalds’ later on that day eating a quarter pounder. Wendy’s seems like a more plausible competitor in the long run, as they are another fast food chain, and they take care to provide quality with their menu choices.

We believe Dunkin Donuts will also be a possible competitor for McDonalds. Although they may not have the same quality coffee as Starbucks, they do have a strong following, and a solid menu for breakfast foods. Since they are at around the same price point, I believe Dunking Donuts will indeed be a strong competitor of McDonalds.

Source:
Horovitz, B. (2013, Feb 12). Burger King perks up its menu with lattes. USA Today.
Retrieved from http://www.usatoday.com/story/money/business/2013/
02/11/burger-king-premium-coffee-lattes-seattles-best/1902785/