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Is McDonald’s the New Dunkin’ Donuts?

By: Allison McCowan *

When you walk down the coffee aisle in your grocery store you will see familiar brands such as Maxwell House or Folgers. In recent years new coffee brands have crept onto your grocery store shelves. Currently on a walk down the coffee aisle, along with the Maxwell House and Folgers, you will see Starbucks, NesCafe, and Dunkin’ Donuts bagged coffee. While it would seem that Starbucks, Folgers, or Dunkin’ Donuts has the bagged coffee covered, McDonald’s might be throwing its coffee in the ring for some more friendly competition.

On September 18, 2012, McDonald’s made an unexpected move and filed a trademark using its name for ground and whole-bean coffee. The trademark registration, filed with the U.S. Patent and Trademark Office could signal that McDonald’s intends to follow Dunkin’ Donuts’ or Starbucks’ path by selling bagged coffee under its own famous name. Otherwise, McDonald’s could hope to use the trademark to deter competition from a competitor from using its coffee. McDonald’s is being very quiet regarding its reasoning behind filing this trademark with a McDonald’s spokesperson downplaying its importance by stating “future plans are not something I can speculate on or confirm.”

Unlike Dunkin’ Donuts, McDonald’s has not traditionally been known as a coffee connoisseur. The Oak Brook, Illinois-based McDonald’s began as a hamburger fast food restaurant but has been expanding its coffee and specialty-drink business since launching its “McCafe” menu five years ago. When it first launched the “McCafe” line, McDonald’s filed trademarks for its “Frappes” and other flavored coffees, which have a higher profit margin than the large majority of McDonald’s food menu. In spite of the struggling U.S. economy, McDonald’s has maintained solid sales growth but has recently felt the burden of slowing domestic customer traffic and increased operating costs.

Besides earning profits from its most profitable “McCafe” menu, another significant reason that McDonald’s should enter the retail-coffee sector is that McDonald’s already has a stronger coffee brand loyalty than its competitors – Starbucks or Dunkin’ Donuts. Statistics indicate that coffee consumption is rising in the U.S. with 58% of American over the age of 18 drinking coffee. With the majority of the U.S. drinking coffee and its overwhelming brand loyalty, McDonald’s would be foolish not to earn further profit from the coffee market.

The transition from selling a hot cup of coffee in a retail store to the grocery store is not an unheard-of feat. Starbucks has been selling its bagged coffee in grocery stores since 1998; Dunkin’ Donuts began selling coffee on shelves in 2007. Dunkin’ Donuts claims that they see success and very strong sales of its bagged coffees in the grocery store as well as the retail stores.

Another significant question facing the McDonald’s company is how far they are willing to travel down the Starbucks or Dunkin’ Donuts path. Both Starbucks and Dunkin’ Donuts have bagged coffee in their retail stores, have bagged coffee on grocery store shelves, and most their newest endeavor, in K-Cups for the specialized Keurig coffee maker. Starbucks and Dunkin’ Donuts have experienced increases in profit following the introduction of their K-Cups; will McDonald’s dominate that market as well? If its profits exceed Starbucks’ and Dunkin’ Donuts’ profits, can McDonald’s officially claim they make the “World’s Best Coffee?”

* Allison McCowan is a third-year student at Wake Forest University School of Law and is President of the Domestic Violence Advocacy Committee. She holds a Bachelor of Arts in Psychology from Norwich University. Upon graduation in May 2013, Ms. McCowan intends to practice corporate law, commercial law, or alternative entity law in either Delaware or Washington D.C.