McDonald's takes aim at Starbucks and Tims

Western Investor
November 30, 2012

As part of an aggressive effort to grab market share from rivals Starbucks Corp. and Tim Hortons Inc., food giant McDonald's Corp. has stepped up a java-fuelled Canadian expansion.

"This year we're going to build more restaurants than we've built in the last seven or eight years," McDonald's Canada president John Betts told Reuters. "Next year it's going to ramp up from that."

Around 30 new stores will open by the end of 2012, said Betts, who did not give specific figures for future periods. McDonald's has about 1,400 outlets in Canada, and is introducing take-home bags of coffee.

His upbeat message stands out against a recent earnings release, when McDonald's reported its worst quarterly restaurant sales growth in nine years thanks to tough competition in the United States. Betts said the chain built too many stores too quickly in Canada. But it turned its business around in the last three years, thanks in part to a big push into the takeout coffee market, which helped boost breakfast sales.

Coffee is not an obvious point of entry in Canada, where Starbucks is ubiquitous and doughnut-and-coffee chain Tim Hortons borders on a national symbol. But between McDonald's coffee push and Tims' expanding lunch menu, the two chains are increasingly going head to head.

Betts confirmed that after making itself a coffee destination, McDonald's is now turning its sights on the home market.

Last month the chain began selling take-home bags of ground coffee bearing the McCafé brand at its restaurants in Canada. Betts said it's a natural progression for the chain, since it now has "coffee cachet" with customers and most coffee still is consumed in the home.

from Western Investor December 2012

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