The battle for fast-food coffee is about to heat up.
Although Starbucks is loath to call itself a fast-food company, for years the Seattle’s Best Coffee business it owns has sold coffee in Subway, Burger King, movie theaters and gas stations.
And for several years, McDonald’s has sold espresso drinks without hurting Starbucks’ revenues.
Wall Street analysts no longer worry that the fast-food coffee market is near saturation.
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“Ultimately, it’s a large and fast enough growing category that it supports multiple players,” said R.J. Hottovy, director of consumer research at Morningstar in Chicago.
The latest twist is that all future Seattle’s Best stores will be drive-thru kiosks.
The chain opened a test kiosk last fall near Starbucks’ headquarters in South Seattle and now says it will open 15 in the Dallas-Fort Worth area in Texas this year.
Eventually, Starbucks expects to have thousands of them.
“Dallasites eat out 70 percent more frequently than the national average, and Dallas County has the highest number of commuters in the nation,” said Jennifer Dimaris, Seattle’s Best’s vice president of channel-brand management.
It has a long way to go to catch McDonald’s, which has 12,600 drive-thrus in the U.S. The company says “McCafé” beverages, including espresso drinks, smoothies and frappés, generate more than $1 billion a year in sales.
McDonald’s Chief Operating Officer Donald Thompson, who says the chain is “the No. 1 source of brew coffee,” told investors a couple of years ago that his chain remained the underdog for frozen, blended drinks.
That’s an area Starbucks dominates with Frappuccinos, which the Seattle company calls a $2 billion “brand.” That appears to mean annual sales, although Starbucks does not confirm it.
“Being the underdog is a great thing, because we have an opportunity to take even more business in this regard, and we can do it at the speed of McDonald’s,” Thompson told investors.
He also said that improving McDonald’s drive-thrus was key to making the McCafé concept work.
That’s something Starbucks is pursuing as well, and not just with Seattle’s Best drive-thrus.
Starbucks now has more than 2,300 U.S. drive-thru locations and plans to add about 900 over the next five years.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org