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The Honolulu Advertiser
Posted on: Wednesday, May 6, 2009

COFFEE WARS
McCafe ad blitz launched

By Andrew Gomes
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

A McCafe was included in a new McDonald's restaurant that was still under construction in February 2007 on Beretania Street. Now there are McCafes in 53 of the 74 McDonald's restaurants in Hawai'i.

ADVERTISER LIBRARY PHOTO | 2007

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McDonald's Corp. added some McFuel to the premium-coffee battle with Starbucks and other cafe chains yesterday, launching an estimated $100 million national advertising blitz for its McCafe espresso-based drinks.

The world's largest restaurant company said its McCafes — which sell cappuccinos, lattes, mochas, iced lattes and iced mochas — represent the most significant addition to its menu since the national launch of breakfast at McDonald's in 1977.

"This is an exciting day for McDonald's and our customers," Don Thompson, president of McDonald's USA, said in a statement. "Our customers can now enjoy a premium quality espresso-based coffee with their favorite McDonald's breakfast or at any time when they want to treat themselves to a great-tasting beverage at a tremendous value."

McDonald's has been aggressively adding McCafes to its U.S. restaurants over the past two years, and they are now in about 11,000 of its 13,700 U.S. stores.

Hawai'i was one of the early test markets for McCafes, with three opening in early 2007. Today, there are McCafes in 53 of the 74 McDonald's restaurants statewide.

Melanie Okazaki, marketing manager of McDonald's Restaurants of Hawaii, said more McCafes will open locally throughout the year.

Thompson of McDonald's USA said McCafe coffee sales exceeded company forecasts, and that about 44 percent of customers at stores serving the espresso-based drinks are coming just for the coffee. He said McCafes are responsible for the highest incremental traffic drive the company has ever seen.

"We're excited about the market opportunity and about the potential we have to become a beverage destination," he said in an interview with Bloomberg News.

McDonald's first established McCafes in Australia in 1993, and had opened more than 1,000 internationally by 2007. The first U.S. test was in Chicago in 2001, and the first domestic in-store McCafe opened in 2003 close to Raleigh, N.C.

The U.S. McCafe buildup launched in 2007, a year after the company's switch to premium coffee — two moves that have helped the company boost sales to $23.5 billion last year from $22.8 billion the year before.

Some of that gain has come at the expense of rivals, including Starbucks and Dunkin Donuts.

Starbucks last week said it will start selling 16-ounce iced coffees for $1.95 through June 29, an offer that cuts as much as 45 cents off the price in some areas. On Monday, Dunkin Donuts cut its latte prices as much as 15 percent in New York, New Jersey and Connecticut.

McCafe drink prices in Hawai'i are generally between $3 and $4, for small, medium and large sizes. Hawaii Coffee Co. supplies the espresso.

McDonald's had tested selling espresso shots and Americanos, but dropped the items from the McCafe menu after trials. Also dropped was a McCafe pastry/dessert menu tested in Hawai'i that included muffins, cinnamon rolls, carrot cake, caramel fudge cheesecake and brownies.

The restaurant experimented with separate McCafe counters operated by a barista, but that model was converted to allow coffee drink orders to be made and filled from any register station.

McDonald's began running national print and television ads yesterday to tout its McCafe offerings.

McDonald's is also using the social networking Web site Twitter to promote the coffee drinks and plans a sweepstakes giveaway.

Bloomberg News Service contributed to this report.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.