Brewing Success: McDonald’s Innovative Venture into Specialty Beverages with CosMc’s
McDonald’s is an iconic global brand, renowned for its golden arches, Big Macs, and savvy marketing strategies. As a result, it should be no surprise that the fast food giant holds the highest brand value amongst quick service restaurants (QSR) in the United States at 191.1 billion USD. Despite the organization's enormous success, CEO Chris Kempczinski saw a new opportunity to leverage the brand power of McDonald’s and diversify revenue streams, and challenge beverage industry leaders such as Starbucks and Dunkin’ Donuts.
In 2009, McDonald’s launched the sub-brand “McCafé” in the United States, following the initial launch in Australia in the 90s. Since the birth of the coffeehouse line, McCafé has not been a threatening competitor to US market leaders Starbucks and Dunkin Donuts, prompting the launch of CosMc’s.
Vision – What is CosMc’s?
Described as “The DNA of McDonald’s but its own unique personality”, CosMc’s provides a unique case to analyze, as its success or failure will determine the true power of branding in the US market.
CosMc’s was born to serve customers with a 3 pm pick-me-up when most QSRs face a lull in traffic. Recognizing that not everyone craves a daily Big Mac, McDonald’s sought to tap into the daily drive-thru beverage routine, presenting a new opportunity for repeat purchases within the McDonald's brand. CosMc’s serves specialty drinks and snack items like the Sour Cherry Energy Burst, which would be impossible to integrate into the traditional McDonald’s menu, as these items tend to be more labour-intensive. While a McCafé beverage could reach your hand in seconds, a Starbucks or CosMc’s product aims to tailor to your taste buds through numerous customization opportunities.
Beyond a revenue-generating venture, McDonald’s appears to be using CosMc’s as a testing ground for innovation. At CosMc’s restaurants, multiple lanes are found within the drive thru, even serving customers based on the size and complexity of the order to ensure the most efficient service. To further create a more immersive experience, the menu boards will be highly dynamic to engage those ordering. McDonald’s being a leader in technological innovation aligns directly with the idea that these lanes could be tested for future implementation at traditional McDonald’s locations.
Viability – Evaluating the Opportunity
Market Attractiveness
With long lines at Starbucks as evidence, the fast-food beverage industry offers a lucrative opportunity for McDonald’s. Chris Kempcizinski stated in the McDonald’s investor meeting that this new market is fast growing and highly attractive, and McDonald’s is currently under-indexed in this space. In McDonalds’ top six markets, the speciality beverages sector is a $1 billion USD category, which also boasts high margins and high growth potential, offering a sustainable new revenue stream.
Multiple players have had great success in this industry in recent years, notably Crumbl Cookies, aligning OR identifying with the 3 pm snack category, which opened 363 new stores this past year with incomparable brand value to the giant McDonald’s.
CosMc not only has the potential to contribute as a diversified revenue stream, but this launch may provide positive spillover effects for the traditional McDonald’s locations by engaging a new younger demographic through the trendy experience.
All while McDonald’s has the industry expertise to successfully launch and market CosMc’s, the challenges in this new market stem from the successful competitors that currently boast high market share. Starbucks ended Q4 2023 with a leading 42 per cent market share and a highly loyal fan base contributing $53.4 billion USD in brand value. For CosMc’s to capture Starbucks’ market share, the new chain must focus on innovation to develop an efficient solution to customizable drinks, as Starbucks goers are no stranger to longer lines.
Market Positioning
CosMc’s holds the advantage of entering the market with industry experience and a valuable brand name behind it. However, failed market positioning will lead to uncapitalized sales and opportunities, deterring the organization from expanding beyond this pilot project. CosMc’s must focus on its nostalgic ambiance, hone in on the afternoon pick-me-up, and prioritize individual preferences. Currently, CosMc’s is avoiding Starbucks’ study-friendly terrain by abstaining from an in-person seating option, which positions the chain as a new option rather than a direct supplement for Starbucks.
Over the Arch and Into the Horizon
In the highly competitive landscape of the fast-food industry, McDonald’s strategic foray into the specialty beverage market with CosMc’s demonstrates the power of global branding. By leveraging its well-established brand, McDonald’s has created a unique concept that taps into growing market trends, providing an engaging experience for consumers. The success of CosMc’s could potentially redefine McDonald’s market presence and influence the quick service restaurant industry's future trajectory.