National Post (National Edition)

McDonald’s to become coffee provider on all WestJet flights.

- HOLLIE SHAW

McCAFE ON WESTJET

TORONTO• Canada’ s coffee wars have moved from the ground to the skies.

McDonald’s Canada announced Monday that it will become the exclusive provider of brewed coffee on all WestJet flights beginning on Nov. 21, an internatio­nal first for its McCafé brand.

The deal, which comes seven years after the quick-serve restaurant reformulat­ed its coffee to a premium blend and two years after it started selling its McCafé brand of coffee in supermarke­ts across the country, is a testament to how well McDonald’s has carved out a niche for itself in this country’s robust coffee market and could signal just how much more of the category it wants to occupy. The company, which has siphoned market share from competitor­s by staging annual free coffee giveaways since 2009, furthered its commitment to growing in the coffee category when it began opening standalone McCafé restaurant­s last year.

“Like all of the things that we have been doing with our coffee journey, this is a perfect opportunit­y to extend the brand,” said John Betts, chief executive of McDonald’s Canada.

“We have had non-traditiona­l ways of extending our brand as a target for the longest time, but we had to get credibilit­y (in the coffee market), which we built over a few years.” He said there might be further opportunit­ies to expand the brand’s reach, though the company is in no rush to do so.

WestJet serves 20,000 cups of coffee to customers daily on about 750 flights.

“We talked to all the big suppliers in Canada, and there was great alignment (with McDonald’s),” said WestJet CEO Gregg Saretsky, who said having a credible coffee brand on flights was important because Canadians are among the biggest coffee drinkers in the world. Meanwhile, rival airlines proudly advertise their coffee partnershi­ps: Air Canada serves Second Cup coffee on its flights, and Porter Airlines serves Starbucks coffee.

At an annual average of 152 litres per person, Canadians consume far more coffee than Americans, who average 115 litres a year, according to market research firm Euromonito­r. And the percentage of 18- to 24-yearolds who drink the beverage has risen to 58 per cent in 2016 from 38 per cent in 2008, according to the Coffee Associatio­n of Canada.

“This is a strategic brand play,” said Robert Carter, executive director of food service at market research firm NPD Group Canada. “The volumes of coffee being consumed are small on flights, so this is not going to move the needle for McDonald’s on volume or revenue. But it is going to expand coffee branding for McDonald’s and get it in front of those passengers.”

McDonald’s is also looking to expand its coffee presence in Western Canada, he added, a place where WestJet has a strong presence given its roots as a regional carrier. “It makes strategic sense.”

McDonald’s share of brewed coffee at restaurant­s in Canada is now 11.8 per cent, according to NPD Group, up from 11.5 per cent in 2015 and close to double the six-per-cent share of the market it had in 2009 when it debuted its reformulat­ed house brew. Tim Hortons is still the industry leader, with a share in the mid-70s, but that has slipped from an 80-per-cent share in 2009.

“I see this as a coup for McDonald’s because the deal is not with Tim Hortons, and WestJet has made being Canadian part of their brand in a way that I would see align more with the Tim Hortons brand than it would with McDonald’s,” said Andris Pone, president of Coin Branding. Tim Hortons also sells its brand of coffee in grocery stores, but has not extended it further into the hospitalit­y industry.

Asked if there was an interest in bringing other McCafé products on to WestJet flights, Saretsky said the current focus is only on coffee.

“Over time we’ll see if that partnershi­p evolves,” he said. “For those who perhaps haven’t tried McDonald’s coffee yet, what a great way to sample something that might create a new drinking habit for them.”

 ?? HOLLIE SHAW / NATIONAL POST FILES ?? WestJet may have been expected to go with Tim Hortons.
HOLLIE SHAW / NATIONAL POST FILES WestJet may have been expected to go with Tim Hortons.

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