The breakfast wars are heating up nicely in the form of a three-way challenge between McDonald's (NYSE:MCD), Yum Brands (NYSE:YUM) Taco Bell and Starbucks (NASDAQ:SBUX). The fight is on to lure unsuspecting customers from One Breakfast table to another.
Taco Bells Breakfast Menu
Taco Bell was the first to take the fight to McDonalds with its New Breakfast menu .Taco Bell’s highly anticipated Waffle Taco, Crunchwrap™, Cinnabon® Delights™, are already available in restaurants nationwide from March 27, 2014.
“Breakfast is the fastest growing day part in QSR [quick-service restaurants], and after years of the same old thing, we’re confident our breakfast will wake up customers’ morning routine,” Taco Bell market chief Chris Brandt said in a statement.
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There are a host of other things that Taco Bell has been doing to catch up with McDonalds. For instance, the breakfast timings have been extended till 11 AM which is a good half an hour more than competition. What more, the fast-food chain has also started taking orders through a new app designed for tablets and Smart phones. Best part about the app is that it lets customers order from the menu list according to their convenience and later allows them to pick their order up when they want. This will allow customers to avoid “Menu Board Anxiety” associated with ordering through a drive-in.
While McDonalds is the current worldwide leader in the fast food industry, these moves by Taco Bell may have forced them to come up with a strategy to counter it.
The Coffee Strategy
The strategy from McDonalds seems to be the one that they know best. On Friday, March 28, 2014, McDonald’s announced they’ll be offering breakfast customers a free cup of McCafe coffee. The campaign will start on 31st March and participating locations will give out free 12-Ounce small coffee to breakfast customers.
McDonald's said the free coffee is its way of encouraging new guests to try McCafe Coffee and "surprising them in unexpected ways all year long." Given the fact that McDonalds may also be planning to take the Premium Coffee segment seriously may be early signs of warning for established Coffee players like Starbucks.The Company is expecting a decline in Sales and is considering extending breakfast hours from 10.30 to 11 AM to compensate the dip.
McDonalds’ US head Jeff Stratton was quoted as saying “We know that breakfast on the weekend cut off at 10:30 doesn't go very well”
Finally, another promotional drive doing the rounds is that McDonalds will surprise a Twitter (NYSE:TWTR) follower every day for the year with McCafe coffee and prizes. This drive is expected to start from mid April.
The Larger Picture
This kind of strategy of offering freebees to customers is not new to McDonalds. Offering free Coffee to customers maybe a good short term strategy for McDonalds’ to counter the likes of Taco Bell but the larger picture is that customers are increasingly looking beyond the traditional breakfast menus constituting of Burgers and Burritos. In emerging markets like China and India, McDonalds’ have not been able to match up with the Yum! Brand KFC or Taco Bell. Primarily, this is because it hasn’t been able to offer the right product mix according to the preference of the local people. A similar scenario may soon be seen in US too, if the company does not identify the pulse of the market.