McDonald’s and the McCafe Coffee Initiative This paper will examine the article, McDonald’s and the McCafe Coffee Initiative prepared by Lindsay Sgros, a discussion of the objectives why the McDonald’s coffee chain was developed and marketed. The idea was that the café initiative could help McDonald’s retain existing consumers and attract more in the shrinking breakfast market by introducing a separate but connected/complementing coffee outfit. The article can best be explained according to this week’s topic of acquisition and merger model. First, there are two organizations: McDonald’s and McCafe. The relationship of these two is unique in the context of merger and acquisition.
Unlike the conventional model, McCafe was not acquired from a separate and established company or incorporated as a new one. The fact is that the original McCafe was an innovation by McDonald’s. Sgros, the Canadian owner of the brand, found out that McCafe is already present in several McDonald’s outlets in several countries. So what happened was that McDonald’s incorporated it from within the loosely structured McDonald’s global operation in order to complement its local operations and competitiveness. This measure has been emphasized by the article, particularly in its description of the Canadian food industry wherein mergers and acquisitions are commonplace.
For instance, the case of Wendy’s acquisition of Tim Hortons was cited, as well as the distribution contract entered into by Second Cup with The Great Canadian Bagel. Sgros’ position was that merger and acquisition became an important tool in surviving the Canadian food industry, which is increasingly characterized by quick service consumers concerned about time and value, in addition to the highly diverse competition driven by the large number of restaurant choices. The article emphasized how McDonald’s Canada is targeting the lucrative coffee market segment.
Pointing how coffee chains are eroding McDonald’s market share, particularly in the breakfast category, the article cited the daily coffee consumption per coffee retailers: Tim Horton with 33 percent, independent coffee chains at 22.1 percent and McDonald’s at a meager 7.1 percent. Addressing the competition in the coffee category could spell huge opportunities for McDonald’s own offerings especially considering the fact that these coffee outlets are also expanding their product lines by offering sandwiches, soups and gourmet products, encroaching McDonald’s main product line.
The McCafe initiative is an excellent move by Sgros and could enhance McDonald’s competitive advantage. McCafe offers a unique and innovative coffee retail concept that appeals to the coffee drinking public, as explained in the Canadian market profile study found in the article. It offers fine coffee experience but at a fast food speed. In addition, it works seamlessly with the main McDonald’s operation, attracting consumers who were previously drawn to coffee retailers. All in all, what McDonald’s wants to achieve with the McCafe initiative is to lure the lucrative coffee drinking public.
It has two underlying objectives: 1) to attract new customers; and 2) to prevent the coffee retailers from taking away McDonald’s consumer base. It is an excellent strategy and must, hence, be pursued and marketed with aggressiveness considering the fact that the current market share of the company is still lagging behind main players such as Tim Hortons.