McDonald's 1993 launch of its McCafe menu was a bold attempt to take on Starbucks and Dunkin'.
The chain dramatically upped its coffee game and over the years expanded the lineup to include a variety of pastries.
The company did not explicitly state that it wanted to go to war with Starbucks (SBUX) -) and Dunkin', but the McCafe menu looked like what a coffee house offered. In some locations, McDonald's (MCD) -) even added separate cafe-style locations in some of its restaurants.
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The project had two goals. The first was the easier one to accomplish: selling higher-priced coffees in the morning hours. Espresso-based drinks sell at a much higher price than traditional coffee. Adding a menu of Starbucks-like coffee enabled McDonald's to make more money from its current customer base.
You can argue that at least with some customers, that part of the McCafe experiment has worked. Where the chain has failed is the larger goal of McCafe: selling more snack-like items in the hours between meals.
That effort clearly did not work, as McDonald's has announced plans to phase out its apple fritter, blueberry muffin, and cinnamon roll. Those have been on the menu for only about three years, but they were key products in the chain's effort to expand its business outside meal hours.
For those bakery items the chain's locations even added special display cases, which also will be phased out as inventory is used up.
Image source: McDonald's
McDonald's Scales Back Its Ambitions
Since the covid pandemic, McDonald's has scaled back its efforts to improve its sales in off-hours between traditional meal times. The chain dropped its All-Day Breakfast, a move that likely helped McCafe sales because the offering added too much complexity to kitchen operations. Franchisees had pushed to drop it.
The company's efforts have focused largely on simplifying and speeding production to facilitate delivery and mobile orders. Dropping the McCafe pastry line does not save much effort, as these were premade items, but it does suggest that the idea of expanding sales in off hours has failed.
That could mean that the overall McCafe line could get scaled back, but the company has not publicly suggested that will happen. McDonald's has clearly learned that it's not going to become a coffeehouse alternative.
Current customers might order a latte or another fancy coffee drink when they're already at the chain. They're probably not going to make a separate McDonald's trip for a late-morning or afternoon pickup.
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McDonald's Might Have a Better Answer
McDonald's has been testing the sale of Krispy Kreme (DNUT) -) products in about 160 locations in Kentucky. The chain has not commented on how the partnership is working, but it's a deal that makes a lot of sense.
Krispy Kreme can't serve McDonald's on a national level yet, but it has been working on building production capacity to grow its wholesale business rather than expanding its store base.
A national McDonald's partnership would give the doughnut chain a strong partner to justify building new kitchens in order to bake more doughnuts nationwide.
Doughnuts complement the McCafe coffee line, and they're clearly an all-day breakfast item. Expanding this partnership makes more sense than selling the McCafe pastries the chain has dropped -- especially because Krispy Kreme has strong name recognition.
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