More than three weeks after its earnings release, fast-food giant McDonald's (NYSE: MCD) is presenting a financial update to analysts later today. International sales have remained strong for the Dow component and a value menu has kept consumers in McDonald's seats even amid economic tightening. Two of the popular items on the low-price menu are a "snack wrap" for $1.49 and a sundae for $1.00. But commodities prices are on the rise, crimping food producers and restaurateurs. To keep its growth pace fleet of foot in light of various challenges, McDonald's is taking a liquid focus. In recent years, the company has gained ground on Starbucks (NASDAQ: SBUX), even winning a taste test with its drip coffee last year. Now the behemoth of the Big Mac is exploring the option of moving further into the gourmet-coffee arena, offering beverages such as iced mochas, caramel lattes, and other espresso-based drinks.
Current experimental pricing has these new drinks at $3.00 a pop, which is cheaper than Starbucks but on par with (or slightly higher than) a full-sized burger or sandwich. While consumers are used to emerging from Starbucks five dollars lighter, can they justify spending more on the empty calories of a sweetened coffee drink than the (basically empty, but still protein-filled) calories of a quarter pounder?
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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Reader Comments (Page 1 of 1)
11-13-2007 @ 2:28PM
Brian Patterson said...
My son got e coli 0157 H:7 from eating a McDonalds meal in August 2002. He was in the hospital on morphine for 7 days. Both McDonalds and Zurich Ins denied any liability yet the CDC National PulseNet database found isolated and random PFGE matches. My advise to anyone is to save their reciepts and a uneaten portion of their meal for further testing and confirmation.
11-18-2007 @ 1:32PM
pookie said...
Um, just wanted to say that I work at sbux, and our drinks aren't priced soo bad. If you order a regular tall latte, that's $3.47. Now if you want to customize it with soy milk (40 cents) a syrup flavor, like vanilla (30 cents) and add another shot of espresso (60 cents) this is what makes your drink soo expensive. For the people who don't quite have the money for this, get a regular coffee ($1.90) for a small cup, add a syrup flavor and put your own milk. VOILA!!! Pretty much the same thing, but sooo much cheaper.