Coffee Wars: McDonald’s Enters the Fray

The potential entry of McDonald’s into the bagged coffee game throws an unexpected wildcard into the mix with the space already crowded by the likes of Green Mountain Coffee Roasters, Starbucks, Kraft Foods Group, and Dunkin’ Brands to name a few. Though the competition is heated, there could be enough cups of Joe to go around as even a tiny sliver of the huge market can lead to significant profits for any of the major players. Coffee market breakdown: The $10B industry percolates at a 5% growth clip per year with a profit margin close to 30%.

 

via Seeking Alpha and Wall Street Journal

 

UPDATE: Though McDonald’s calls the chatter “speculative,” the smart money says Mickey D’s will take a crack.

 

The Buzz on Coffee, Beer, Soda, Smoothies, Energy Drinks, and H2O

What’s all the fuss about beverages? It goes back to the Irish proverb that reads good as drink is, it ends in thirst. Around and around it goes. So to keep tabs a bit, here’s the rundown:

Beer

Anheuser-Busch buys Grupo Modelo for the Corona brand, but is now too large with a market share north of 50% in the U.S. This means the company may have to divest the iconic Busch brand or Natural Light, which just doesn’t seem right. It also means SABMiller won’t be merging with A-B after all, but hey it’s still partners with Molson Coors which it gives it great-tasting Grolsch and Killian’s Irish Red and their 0.1% market share. Meanwhile, thousands of microbreweries bash each other into near oblivion with intense competition – despite having a clearly superior product. The big get bigger.

 

Coffee

Starbucks isn’t satisfied being a $40B company and is dabbling in nearly every form of beverage out there. For instance, today it launched a Very Berry Hibiscus refresher drink replete with blackberries and coffee. If it can be crushed and caffeine added, Starbucks will try it. Customers in Seattle, Atlanta, and Chicago are even the test guinea pigs to see if baristas selling beer and wine freaks out regulars. A company called Green Mountain Coffee Roasters claims to have reinvented the coffee industry with a single cup Keurig brewer system, but expiring patents and a 75% drop in its stock tips off they may be wrong. As for just a cup of joe, McDonald’s and Dunkin’ Donuts are making their mark with premium blends that defy their rep for junk food. Who knew?

 

Soda

Mayor Bloomberg got a little cranky about obesity in NYC and proposed banning large-sized drinks, creating quite a ruckus. While the movement to regulate soda intake is DOA on Main Street, it has generated interest on Wall Street. PepsiCo is getting into yogurt, Coca-Cola is promoting its Vitamin Water, and even Campbell Soup is going organic by buying Bolthouse Foods for its carrot juice. But it’s all a fad…32-ounce Mountain Dews won’t be upstaged by carrot juice any day soon.

 

Energy Drinks

Everybody wants an energy drink product now that the industry kicked up sales of over $30B. To that end, Coca-Cola might be buying Monster Beverage because the rest of the entries sound just plain toxic (Full Throttle, Sobe No Fear, Amp, Rip It) in a confusing industry. Juggernaut Red Bull probably will stay independent, although it’s a bit of a surprise to learn that its HQ is in Austria, not Las Vegas. And what exactly does 1000mg of Taurine do to the body anyway?

 

Smoothies

Who has the time to pull a blender and mash up a bunch of fruit and ice when you can buy a smoothie at every McDonald’s, Burger King, and Starbucks in town? Still if convenience isn’t an issue, pure-plays such as Smoothie King or Jamba Juice tend to be bit more on the authentically healthy side.

 

Water

Yes, water is pretty much the same. Tap or bottled, two parts Hydrogren and one part Oxygen does the trick.

Sources:

Starbucks.com
Bloomberg.com
Bevnet.com
Anheuser-Busch Inbev
Seeking Alpha

 

Advertising Local Specials on Foursquare

According to media reports the social networking site, Foursquare, has passed two million users. Many of these users are actively engaged with Foursquare by checking-in frequently as they travel around. Should your business try to capture their attention by advertising “local specials” on Foursquare? It all depends on the business.

If you are selling ice cream or smoothies on a hot day, Foursquare may deliver a very high ROI for an advertising campaign. On the other hand, if you are a doctor, an accountant, or any business that does not rely on impulse buying – Foursquare advertising is less likely to deliver great results.

The other way to utilize Foursquare advertising is to undercut a competitors price with a local special. Foursquare ads are viewed on mobile devices within your immediate local area (assuming Foursquare delivers the ads properly based on geo-targeting). Unlike some forms of CPM and CPC advertising that are hard to gauge results immediately, Foursquare advertising should deliver immediate data to evaluate. If a company runs a campaign on Foursquare and lowers a price for one of their goods or services via the Foursquare special, the company will know instantly if they have captured any additional local foot traffic. In some ways the abiulity to measure results is even better than companies that sell products online, because those metrics have to rely on cookies or user identication to be wholly accurate. 

What not to do with Foursquare advertising was demonstrated recently with Starbucks. The campaign that Starbucks ran rewarded the “mayors” of each of their stores, but did not provide an incentive to visit the store. Most people do not have the time or energy to try and win the war to be the mayor of the Starbucks they frequent. If anything, the Starbucks Foursquare special pestered loyal customers.

So the lesson is: Test Foursquare, track the results, see if it is a perfect fit for your business.