Listen Small coffee shops vs. McDonald's
Jun 12, 2008
Listen Ted Lingle, executive director of the Coffee Quality Institute, discusses McCafe and local shops
Jun 12, 2008
The sheer number of McDonald's locations immediately makes it a coffee giant in the market.
You might think smaller coffee stores and chains would be nervous, but many say they're not.
In fact, some small shops say McDonald's will be a welcome addition to the coffee business.
Diane Peterson could walk from her office in Eden Prairie to the nearest McDonald's for a cup of joe. But there's no need, since her office is the Dunn Brothers coffee shop she owns.
Still, you might wonder what a coffee shop owner thinks when she tries a McCafe drink.
"It tastes like hot chocolate," she said, after sipping her first McDonald's mocha. "It doesn't taste like coffee. Maybe a little, but not really."
Peterson says it's not a bad drink, it's just not what she sells. That confirms her belief that the product and customer service she offers leaves her with nothing to worry about.
"I think we'll be fine. Bring it on, McDonald's!" Peterson exclaimed. "They specialize in breakfast and we specialize in coffee, and I don't know that that's ever going to change. It's just kind of the way it is."
A few suburbs away, in Golden Valley, McDonald's owner Tim Baylor is watching one of his managers prepare a cappuccino in the restaurant's new automated espresso machine.
Baylor speaks softly but is often the biggest guy in the room. He's a former Minnesota Vikings safety and one-time candidate for lieutenant governor who's owned three McDonald's for the past decade.
Baylor agrees there's room enough for everyone in the coffee business. He thinks plenty of people will prefer mochas from a McCafe because it might taste more like hot chocolate to some. And it's also cheaper.
"We're not a coffee shop," Baylor said. "So you won't be able to get the variety of beans here, but you can get the product. The product is a good one, and for 99 percent of the population, I think they'll be overwhelmed by the taste and their satisfaction."
Independent coffee shop owners are also excited to have McDonald's in the game.
Peter Giuliano is vice president of a group called the Specialty Coffee Association of America, which recently held its national convention in Minneapolis.
Giuliano has witnessed an interesting trend: Having more shops doesn't divvy up the same number of sales to more places, it increases overall coffee drinking.
He remembers, for example, "freaking out" years ago when Starbucks first opened in San Diego, where he owned five coffee shops. But that year's sales were his best ever, and they kept improving.
"What we saw was Starbucks helped educate the market, and McDonald's can do that too," said Giuliano. "Somebody who's never experienced a cappuccino before might be more inclined to try it at McDonald's than even Starbucks. And then they tend to graduate from there, to maybe an independent that might feel a little less accessible than McDonald's. That's the path we see."
Giuliano also says McDonald's will inevitably improve the quality of its coffee, which will force small shops to do the same.
The Twin Cities market is just the latest one to debut the McCafe. Some industry analysts say the specialty coffees haven't been as popular in other markets as they expected.
But no one's discounting McDonald's, either. Specialty coffee is just the first part of a long-term rollout of a number of products being planned, including smoothies.
This also suggests that coffee is still a growth industry. Coffee is, after all, the second-most commonly traded commodity in the world, behind oil.
Despite the sluggish economy, Diane Peterson says her Dunn Brothers store is still seeing increased sales.
"People still need their coffee!" she said.
Even with two giants now on the same block -- Starbucks and McCafe -- Peterson and her husband are thinking about opening a second coffee shop in the suburbs.