McDonald’s to hold prices; coffee sales up 38%

Posted June 3, 2010 at 5:41 a.m.

Dow Jones Newswires | McDonald’s Corp.’s coffee sales are up 38
percent through April of this year, Chief Executive Jim Skinner said
Wednesday, on top of 25 percent growth in 2009, evidence that the
deeper foray into java is paying off.

Executives speaking at an investor conference said McDonald’s will
continue to advertise behind its premium
coffee line, McCafe, throughout the year to continue momentum on that
product line. But the company is also continuing to focus on value
across its menu, especially as the unemployment rate remains high.

Coffee continues to grow at a rapid clip at the world’s largest fast-food chain, and beverage sales could get a lift as McDonald’s gets set to launch two new products, Frappes and Smoothies, nationally in July. Speaking at a Sanford Bernstein conference, McDonald’s President and Chief Operating Officer Don Thompson said both products have performed “exceptionally well” in tests, and the company is working on new extensions of beverage products as well.

Skinner said that unemployment is the main inhibitor to the economic recovery, and he reiterated the fast-food chain feels it has little leeway to raise prices for fear of losing customers.

“We are holding the line on pricing during this environment, because the most important thing is to continue to maintain guest counts and traffic in your restaurants during downturns, which we have done very successfully,” Skinner said.

Skinner also disclosed that McDonald’s plans to start selling oatmeal at its U.S. stores starting in 2011.

Skinner said that McDonald’s menu, with low-priced items and some premium-priced products, is shaped so that it can withstand volatility in economies, like the volatility Europe is currently experiencing.

“Our business model is designed to operate in basically any economic environment,” Skinner said.

McDonald’s strategy has helped it outperform other fast-food chains recently, as it continues to focus on growing market share.

McDonald’s shares rose $1.30, or 2%, in recent trading to $67.66, as the broader markets rose. The Dow Jones Industrial Average was up 1.9% in recent trading while the Standard & Poor’s 500 index rose 2.3%.


Comments are closed.