McDonald’s USA announced yesterday a partnership with The Coca-Cola Company, Inc. to introduce ready-to-drink versions of its McCafé line of coffee frappes to retailers in early 2018, marking the fast food chain’s first entry into the bottled coffee market and further expanding Coke’s growing portfolio of coffee-based beverages.
The new line of McCafé Frappes — available in Caramel, Mocha and Vanilla varieties — will be produced, distributed and marketed by the Coca-Cola system, according to a press release. Each SKU will be made with 100 percent Arabica beans, milk and sugar and be sold in 11.7 oz. resealable PET bottles. Financial terms of the deal were not released.
“We know people are going to love McDonald’s new, ready-to-drink McCafé Frappés,” said Coke in a statement. “As longtime partners of McDonald’s, we look forward to working together to expand the reach and availability of McCafé coffees to more people across the country. McCafé Frappés will join a diverse yet complementary range of ready-to-drink coffee offerings made and distributed by Coca-Cola.”
The McDonald’s partnership is further confirmation of Coke’s ambitions to seize a larger share of the over $2 billion RTD coffee category, which is currently dominated by Starbucks-branded products produced and marketed by PepsiCo. Earlier this year, Coke launched a new four-SKU line of RTD iced coffee drinks in partnership with Dunkin’ Donuts designed to compete with Starbucks’ Frappuccino products. The Atlanta-based soda giant also debuted a new line of cold brew coffees through its Gold Peak brand.
In addition to Gold Peak and Dunkin’, Coke’s RTD coffee portfolio also includes premium Italian brand illy issimo and Java Monster, a coffee-based energy drink produced by Monster Energy and distributed by Coke bottlers.
When asked if Coke’s partnership with Dunkin’ presented any conflicts of interest for McDonald’s, a spokesperson for the company said in an emailed statement, “We are always trying to keep up with the competitive coffee industry and listen to our customers’ needs and preferences. Our strategy with this relaunch is to address what they want because nothing comes before coffee for many of our customers.”
As part of the Dunkin’ deal, Coke agreed to pay a fee that will be divided between the corporation and the individual franchisees that operate its retail stores in order to cover potential sales lost to bottled products. It is not clear if the McDonald’s agreement will include a similar fee or protectionary measure for its franchise owners; in response to a question about potential compensation for franchisees, a McDonald’s spokesperson stated, “Our operators are excited by all of the changes we are making to build a better McDonald’s, including our recommitment to McCafé. The retail presence helps elevate the McCafé brand and platform as a whole, which benefits everyone.”
For McDonald’s, the move into RTD coffee is part of the company’s overall revamp of its McCafé experience, which includes the addition of new espresso drinks to the menu and upgraded coffee machines. The burger chain currently markets a range of whole bean, ground and single-serve coffee products sold at conventional retailers.
“This is just the start of our McCafé commitment,” said Chris Kempczinski, President, McDonald’s USA, in a statement. “We understand how important the coffee culture is for consumers and we are committed to meeting that demand at the taste, convenience and value only McDonald’s can offer. This is a central part of our growth strategy and we can’t wait to share what’s next.”