McDonald's Bets on New Cold Beverages

The fast-food chain seems to be shedding its image as only a place to get a burger and fries.

May 19, 2010

DETROIT - McDonald??s is banking that its customers will want to buy smoothies and other cold beverages as the fast-food chain continues its development beyond burgers and fries, USA Today reports.

As the chain has expanded its beverages, McDonald??s has taken on convenience stores, grocery stores and Starbucks. Since March, McDonald??s has slowly introduced iced frappés, with CEO Jim Skinner pointing to last month??s 3.8 percent same-store sales jump as partly fueled by frappés.

Smoothies will be the next cold beverage unveiled by the company, as adding higher-priced beverages to its drink line-up boosts average check amounts and brings in customers during slower dayparts, such as afternoons.

With not much other room to grow, McDonald??s is aggressively going after a piece of the $153 billion Americans shelled out on non-alcoholic drinks in 2009. Specialty coffee accounted for $13 billion in the United States, with McDonald??s coffee sales soaring into double digits each year since it debuted premium blends in 2006.

McDonald??s will introduce iced smoothies and frappés nationwide during the next few months with a huge marketing push for both beverages in July. Morgan Stanley analyst John Glass said the new beverage plan "is the biggest thing McDonald's has done since it rolled out breakfast," which currently brings in a quarter of the chain??s domestic sales.

Once frappés and smoothies have been established in all stores, McDonald??s could realize $2 billion in yearly specialty beverage sales, making the chain the third largest specialty beverage retailer in the country, said Glass.

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