Although coffee drinkers order that drink at various times throughout the day and night, coffee sales particularly benefit the breakfast daypart, which, Thompson noted, is McDonald's most-profitable meal period. Two hand-held sandwich products the chain also is testing-a bigger breakfast burrito and a Southern-style chicken biscuit-also are aimed at strengthening breakfast.
"We think [the chicken biscuit] has the potential to make waves outside the South," Thompson said. He did not further describe the product, and other McDonald's spokesmen could not be reached for comment.
Not only has coffee contributed to McDonald's strong breakfast daypart, but coffee in general has proved to offer especially good profit margins.
"You can't get much better profit than by adding water to beans," Thompson said. "It's a great margin business and one that customers are asking for."
Another product that offers an equal or even better profit margin is tea, which McDonald's may capitalize on if it rolls out a sweet iced tea now being tested in some 4,000 restaurants. Thompson called both tea and coffee "an effective way to gain added customer visits."
One of McDonald's senior executives has registered to attend the World Tea Expo, the world's largest tea trade event, this June in Atlanta, according to George Jage, the event's president. If McDonald's incorporates specialty teas into its permanent menu, it will have a major impact on tea sales in this country, he said.
"McDonald's inclusion of flavored or specialty tea in its restaurant offerings will further move tea into the mainstream of Americans' diet and consumption," Jage predicted.
Variations on iced teas and coffees continue to make inroads in the quick-service segment. Burger King, Dunkin' Donuts and Sonic America's Drive-In recently broadened their iced beverage lines, and Chick-fil-A introduced sweetened iced tea a few years ago. Burger King introduced BK Joe on the Rocks, an iced coffee, in January; Dunkin debuted a specialty iced tea line last summer; and Sonic continues to add new twists to its flavored iced teas.
Frozen blended coffee drinks continue to gain popularity. Most specialty coffee chains are continuing to expand those lines, such as Coffee Beanery's Frappalattes, which have gained 2 points in sales in the past year to account for 7.8 percent of sales.
Although few traditional quick-service chains have so far emulated those fast-casual players that augment their fountain soft drinks with bottled versions, McDonald's is looking at that possibility as a way of offering more choices.
"Customers are looking for convenience. Sometimes that means resealable containers," Thompson said.
The challenge is to ensure that the restaurants maintain their higher profit margin from fountain drinks if bottled ones also become available, he said.
A Sandelman & Associates consumer survey of quick-service restaurant patrons disclosed that soft-drink purchases dropped to 47 percent of visits in 2006 from 52 percent in 2005, said Bob Sandelman, president of the industry research firm. Coffee purchases gained 1.1 percent in the same period, up to 3.5 percent of visits, compared with 2.4 percent a year earlier. Tea and water purchases also increased slightly.
However, Sandelman said he does not see espresso drinks becoming a major part of business at traditional quick-service restaurants.
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