McDonald’s explores adding smoothies, specialty drinks to menus

By The Associated Press

CHICAGO – Smoothies, iced coffee and other specialty coffees could be added to the menu at U.S. McDonald’s restaurants, a top executive of the world’s largest restaurant chain said Wednesday.

Ralph Alvarez, president and chief operating officer of McDonald’s Corp., said the company is exploring those drinks and others as it seeks “destination beverages” to bring new customers to its restaurants.

“Our beverages have really been complementary to a sandwich purchase,” he said at a conference sponsored by Bear Stearns in New York. “That’s the space we offer it in. So we are going after destination beverages that attract visits from customers to McDonald’s throughout the day.”

McDonald’s already has scored a hit beverage recently with the addition of premium coffee tomore than 13,700 of its U.S. restaurants a year ago. Alvarez said coffee unit volume is up 15 percent as a result.

The introduction of a higher-priced coffee was part of the Oak Brook, Ill.-based chain’s push to grow its breakfast business, and Alvarez made clear that expansion effort remains a top priority as reflected by aggressive marketing and new products.

Up next is the cinnamon melt, which Alvarez described as a warm, pull-apart sweet roll with cinnamon glaze. It is to be rolled out in 11,000 U.S. McDonald’s by summer.

“Customers recognize that McDonald’s is now more than a hamburger restaurant,” he said in remarks broadcast on the Internet.

“We’re also about chicken, we’re about salads, and very importantly we’re about breakfast,” he added.

Despite the push on other products, he noted, McDonald’s still sells more hamburgers than it did four years ago.

Morningstar analyst John Owens said McDonald’s latest priorities reflect an industrywide effort to draw more customers at times when restaurants traditionally aren’t full.

Like Starbucks, he said, “McDonald’s would like for people to come into their restaurants throughout the day as well and maybe have one of these new snacks wraps and one of these new beverages, and give people more reasons to visit more often.”

Alvarez acknowledged in response to an analyst’s question that McDonald’s was slow to introduce a higher-quality coffee, just as it was slow to follow others in adding more chicken items to its menu.

“Quite honestly we were more focused on replicating the restaurants we had than keeping up with trends,” he said.

Carl Sibilski, managing director of Oyster Capital Management, a Chicago-based hedge fund, said the chain doesn’t need to be first with trends.

“McDonald’s is so large that they don’t really need to invent anything at this point,” he said. “For McDonald’s, it’s more important to recognize new things that are working well for competitors and finding a way to incorporate it into their system.”

Pursuing specialty beverages is a good idea, he said.

McDonald’s shares fell 77 cents, or 1.7 percent, to close at $43.69 on the New York Stock Exchange after having reached a seven-year high of $46.21 last Friday.