McDonald's McBets on McCafé
Coffee/pastry bistro outlets target Second Cup/ Dunkin Donuts

In an effort to boost its $2.14 billion share of an increasingly competitive Canadian fast food market, McDonald's Restaurants of Canada earlier this month began quietly testing a new gourmet coffee and desert outlet format called McCafé, in the Longueuil metro station.

The bistro, targeted at Second Cup and Dunkin Donuts customers, offers a variety of specialty coffees including cappuccino, espresso, café latté, as well as a selection of pastries. It is set up as a stand-alone restaurant located beside a conventional outlet, both of which are being run by McDonald's franchisee Tony Christidis.

McDonald's is testing three coffee shop formats in Canada. One, in Burlington, Ontario, is simply an extension of an existing McDonald's counter. A second location, to be opened in British Columbia, will feature a separate coffee counter, located within an existing restaurant. But the Longueuil bistro, is the first that will operate as a stand-alone restaurant.

The McCafé format was developed in Australia in 1993, and since then, nearly 300 have been set up in 18 countries. "We are still not sure how these outlets are going to evolve," said Barbara-Ann Thompson, vice-president (marketing) of McDonalds' Quebec operation. "We are testing the formula to determine customer tastes as closely as possible."

Will the formats work here in Quebec? A quick sampling of the McCafé wares shows that McDonald's is bringing both its strengths and weaknesses into the bistro business.

With McDonald's traditional military precision, both the espresso and cappuccino took literally seconds to serve. This was a considerable relief compared to many of this city's bistros. In Montreal it's common when you order a cappuccino, to be subjected to watching a trainee scratch his head, as he tries to figure out how to operate the machine or get the foam right.

The difficulty that many smaller shops have in cranking out cappuccinos and espressos quickly, is often reflected in the price, which is much higher than you would expect considering the raw materials involved. At $1.99, for a large cappuccino, the McCafé's version is very competitive.

But the decor is a bit of a drawback. The McDonald's brand is one of the most powerful in the world. However its bright yellows in the golden arches, and the whites and oranges that you find in many of its restaurants are designed to attract kids.

While the Longueuil McCafé outlet is appointed in darker colours than the restaurant next door, the McDonald's corporate identity is unlikely to appeal as much to coffee drinkers, who tend to be older than its typical customers.

The McCafé initiative comes at a good time for McDonalds, which has been seeing growth pains on a number of fronts. With 29,000 restaurants world wide, and about $40 billion in annual system-wide sales, the company is so big, that in many markets such as the U.S. and Europe, it is running out of places to build new locations. And stiffening competition is putting a dent in same store sales, leading to grumbling among franchisees.

But other external problems are also causing headaches. The McDonald's brand's massive success has made it the symbol of hated "transnational corporations," that anti-globalization activists often target with protests and vandalism.

Beef supply problems caused by foot and mouth disease are slowing European sales. And the recent US $13 million frauds against its "Monopoly" and "Who wants to be a Millionaire" promotional games haven't helped.

Here in Canada, a new ad campaign by Cossette-Communication Marketing with the tag line "There's a little McDonald's in everyone," was launched amidst the accusation that the company is playing hardball by closing down unionized outlets.

There is little McDonald's can do about its bad PR for the time being. But the McCafé bistros, are a small way for McDonalds to take on growth problems, by giving existing franchisees the opportunity to add to their product lines, and also, by opening new stand alone locations.

Aside from the decor, the McCafé experience recalls Southern Europe. In multitudes of coffee bars in Spain, France and Italy you can walk in, gulp down an espresso, and scram, in less than five minutes. And in today's economy, any supplier who can save the consumer time, is his best friend.

 

Photo: Barbara-Ann Thompson, (right) McDonald's Quebec's vice-president (marketing) samples the wares at the company's McCafé bistro in the Longueuil metro station, with two unnamed persons.

 

E-mail can be sent to Diekmeyer at: peter@peterdiekmeyer.com

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