Fast food giant McDonald's (MCD) has announced plans to team up with Kraft Foods (KRFT) to sell its McCafe-brand coffee in grocery store chains next year.
Kraft Foods will be responsible for handling the distribution and marketing side of the venture.
During its most recent quarter, Kraft Foods posted a 4.2% slide in revenues, and during McDonald's most recent quarter it reported revenues that were below Wall Street estimates. Both companies are dealing with some difficult times, and this partnership should help boost sales for both companies.
McDonald's has struggled as of late, due to increased competition and a shifting U.S. appetite, but its coffee lineup has been strong. Due to the recent success of its McCafe branded coffee, I think getting it into grocery stores makes perfect sense at the current time.
While McDonald's has found success in its coffee, it is still not viewed as a “premium” brand. This may change once it is found on grocery store aisles alongside brands such as Starbuck's (SBUX) and Dunkin Donuts (DNKN).
The coffee will be packaged in whole bean and ground coffee, as well as available in single-cup options, with Kraft handling the distribution and marketing side of the venture.
Getting its coffee into grocery stores is a major step for McDonald's, but the company has no experience in marketing to this consumer group, which is why a partnership with Kraft makes so much sense. Grocery store marketing is Kraft's bread and butter, and it will have a much easier time figuring how to sell McDonald's coffee in stores.
Kraft has a great deal of experience in the coffee industry, but its partnership with Starbucks fell apart a few years ago, so it has most likely been looking for another company to partner up with. I think it has chosen wisely with McDonald's. Kraft Foods is also the name behind national brands Maxwell House and Gevalia, so it has plenty of experience in the market.
The move is smart for McDonald's it in addition to creating a new product to sell, it also puts McDonald's coffee on store shelves next to coffee bearing the Starbucks and Dunkin Donuts brands, which may help enhance the company's reputation among coffee drinkers.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.