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McDonald’s betting on coffee for profit growth?

November 3, 2009
By Ken Worsley


On Monday, McDonald’s Japan reported that its pretax profit had jumped 25% in the January-September period compared to a year ago, despite a 10% drop in same-store sales, which can be explained by the conversion of many shops to franchises during this period. Overall sales were actually up 3.3%, again hitting an all-time high. Existing store sales were up 1.7% although the number of customers actually showed a 0.6% decline.

In an effort to get more customers in its shops, McDonald’s gave away free coffee on a few dates during the third quarter. Although the number of customers at existing stores showed a decline, this figure is also mitigated by the transformation of centrally owned shops to franchises.

The increase in profit despite the fall in sales can be attributed to cost cutting measures, including McDonald’s slashing its spending on television program sponsorships.

By the end of September, the number of franchise McDonald’s shops outnumbered directly run stores for the first time.

What lies ahead for McDonald’s? On Tuesday, the Nikkei announced that McDonald’s intends to launch seven espresso drinks under the McCafe brand on November 21 - as had been hinted at in Monday’s quarterly report. Once again, McDonald’s plans to offer free cafe latte drinks to its customers.

Can McDonald’s challenge the big coffee shops? I don’t know, but they certainly win out with me every day they give away free coffee. It’s too bad I have to find somewhere else to eat.

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Comments

5 Responses to “McDonald’s betting on coffee for profit growth?”

  1. Adamu on November 4th, 2009 9:33 am

    McDonald’s stands to see some real growth ahead as the mass impoverization of Japan progresses. Since no one can afford real Starbucks, McDs can step in with their ghetto bizarro version.

  2. Ken Worsley on November 4th, 2009 5:00 pm

    I agree with you there Adamu. I’m actually surprised that their coffee is not all that bad.

  3. Beijinger on November 14th, 2009 9:55 pm

    McDonald’s food =absolute diabetes and heart disease causing garbage, but I agree their coffee are actually decent, and a lot stronger than the overpriced and under-caffeinated Starbucks variety.

  4. savannah on December 7th, 2009 8:55 am

    i love mcdonalds and they have the best cofee EVER!!!!!!!!!!!!!!

  5. k on January 31st, 2010 10:31 am

    starbuck’s still looks decently busy here so your impoverished japan stuff goes out the window, plus many people go there for the non-smoking aspect and are willing to pay for it

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