Company Trend Analysis - McDonald's Expands Into Ready-To-Drink Coffee - NOV 2017

BMI View: McDonald's portfolio diversification strategy as it invests in the McCafe brand is set to continue in 2018, with the launch of its ready-to-drink beverage category. The company is partnering with Coca-Cola to launch McCafe Frappe bottled beverages in the US. The product launch is part of McDonald's wider plans to diversify its customer base, by appealing to consumers throughout the day.

McDonald's has partnered with Coca-Cola to launch ready-to-drink McCafe Frappe beverages in the US in 2018. The McCafe Frappe beverage range will include flavours like caramel, vanilla and mocha. This will be the fast food company's first foray into the ready-to-drink coffee category, and the bottled drinks will join McDonald's already successful line of whole bean, ground and single-serve coffee currently available in restaurants across the US. Moreover, this investment is in line with our view that ready-to-drink coffee will be an outperforming segment of the US beverages market, as the 'on-the-go' trend holds strong appeal among busy millennials (see 'Ready-To-Drink Coffee Set For Rapid Expansion As Coca-Cola Enters Market', September 2016).

McDonalds is seeking to diversify its portfolio by investing in its McCafe brand, instead of relying solely on its meals business, allowing it to attract a constant stream of customers throughout the day, rather than during meal periods. In addition, the company is also hoping to add a new clientele to their restaurant chain by appealing to time-starved young adults who are looking for convenience and simplicity in getting their morning or afternoon coffee. The bottled beverages will also appeal to consumers wanting to enjoy coffee at home or on the go and will put McCafe into greater competition with the likes of Starbucks who already offer bottled beverages.

US Coffee Market To Grow Steadily
Coffee, Sales (USDmn)
e/f=BMI estimate/forecast. Source: BMI/National Statistics

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