McDonald’s takes on Tim’s
TORONTO McDonald’s Canada is taking on Tim Hortons and Starbucks in one go by opening standalone versions of its successful McCafe concept in highly-trafficked areas of Toronto — the first outlets of their kind in North America.
The veteran fast-food chain has made serious inroads into Canada’s restaurant coffee market since reformulating its classic brewed coffee blend in 2008, and in 2011 began expanding its McCafe concept, which sells coffee, espresso drinks, baked goods and smoothies, into 1,200 of its 1,400 restaurants across the country.
But the new outlets, opening Wednesday in the commuter hub of Toronto’s Union Station and in January inside the highly trafficked downtown Exchange Tower, represent a bold step for McDonald’s Canada, which has managed to escape the sales troubles faced by its U.S. counterpart, due in no small part to the burgeoning growth of its coffee and breakfast business. The new stand-alone locations will be rolled out across Canada if they perform well, and could stand to meaningfully grow the mature chain’s market share.
In addition to its fast-growing category of coffee, the stand-alone McCafes will have a new lineup of soups, salads, cold and hot sandwiches and bagels, as well as baked goods. It also has an ace up its sleeve that answers a longtime demand — all-day servings of its four varieties of McDonald’s Egg McMuffins. “This is where we have momentum,” said John Betts, chief executive of McDonald’s Restaurants of Canada Ltd., in a preview of the Union Station location. “Since 2009, we have grown our share of coffee more than all the other players put together, which is significant, because we have not grown our (store count) that much. That tells me we have a very special connection with the Canadian public in terms of how they feel about McCafe.”
The menu is a big change, too: In addition to the existing staples of McMuffins and a new line of sweet baked goods, it boasts a selection that would appeal to its key competitors’ customer bases — from comfort food offerings such as a classic grilled cheese or a roast chicken sandwich, to on-trend salads and sandwiches. Newer dishes include ingredients such as edamame and sriracha and a broader array of vegetarian options — a lentil and sweet potato hummus wrap with kale sells for $5.99 and it costs $6.99 for a kale and brussels sprouts salad with mixed vegetables.
“This menu in some ways has leaped over the competition — it goes after Starbucks and Tim Hortons at the same time with its selection,” said Bruce Winder, a partner at Toronto-based Retail Advisors Network. “McDonald’s has made big inroads and established great credibility in its coffee line over the years. Starbucks is a great environment, but you pay a premium for that. If this is priced below Starbucks, they can win big.”
Prices appear to be competitive: Starbucks sells a sausage, cheddar and egg English muffin breakfast sandwich for $3.95, (compared with $3.59 for an Egg McMuffin with meat options); Starbucks’ lineup of cold sandwiches ranges around the $6.95 price point, as does McCafe’s; and Starbucks’ newer salads cost $8.95, versus $6.99 to $7.99 for McCafe’s large salads.