McDonald’s wants to become a beverage destination, and it’s expanding its beverage lineup for the holiday season.
It’s part of a broader plan to use drinks to drive more traffic outside of traditional meal hours, and that’s working, according to CFO Ian Borden, who was asked about how beverages are performing during the chain’s second-quarter earnings call.
“More than half of the traffic is coming after lunch. That’s really compelling for us because it’s at parts of the day where we have lower volume, more capacity,” he said.
Selling a broader beverage lineup has also produced for McDonald’s in other ways.
“And I think it’s a sign that we’re getting incrementality as a new occasion because of the beverages. Strong average check because of the strong food attachment that’s also going with beverages. Average check is up about 50% over kind of the full day average check,” he added.
Now, the fast-food leader has three new drinks for the holiday season.
McDonald’s adding seasonal beverages
McDonald’s is giving fans a head start on the holidays with a new lineup of limited-time drinks arriving Nov. 3 at participating restaurants nationwide, featuring:
- Frosted Cranberry Splash with Sprite: A crisp Sprite infused with bright orange and cranberry flavors, featuring cold foam and cranberry sprinkles for a refreshing finish.
- Red Bull Frosted Cranberry Energizer: The bold, uplifting flavor of Frosted Cranberry with cold foam and sprinkles meets the energizing boost of Red Bull — made for packed holiday schedules and festive adventures. Available with classic Red Bull and Red Bull Zero.
- Cookie Butter Frappé, Lattes, and Iced Coffee: A creamy blend of rich cookie-butter flavor topped with caramel-cookie crumbs and sweet vanilla whip for a seasonal treat.
McDonald’s wants more visits and higher margins
“The higher margins on drinks can be discounted to drive traffic,” retail analyst Bruce Winder told Axios. “They are also used to bring in customers who may then buy food.”
It’s a strategy that has worked on me.
As someone who almost never visits McDonald’s, I have stopped at the chain to try its Dirty Dr Pepper and may visit to sample its frozen Blue Fanta. Those are visits that come at the expense of Starbucks, where I generally go for an afternoon drink.
It’s not that I will become a regular McDonald’s visitor, but it’s a nice change of pace, and adding new holiday choices gives me another reason to visit.
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I’m not alone in making a beverage-only visit.
“Consumers ordering beverages without food represent an increasing percentage of restaurant traffic, and the occasions occur throughout the day,” according to Restaurant Business, citing NPD’s Expanded Beverage Service, which tracks all beverage foodservice occasions.
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McDonald’s sees opportunity
Growing its beverage business has been part of a long-range plan for McDonald’s.
CEO Chris Kempczinski sees the company as being “under-indexed” during the mid-to-late afternoon, giving it room for growth.
“One area of focus has been identifying ways to participate in attractive and fast-growing categories. We homed in on specialty beverages and coffee…. It’s a space we believe we have the right to win,” he said at the restaurant chain’s 2023 Investors’ Day.
Beverages also allow McDonald’s customers to engage in an affordable indulgence.
“We have an issue of economy, and I think a McDonald’s is that low entry point, and if all you want to do is have a drink and feel special, that McDonald’s entry point might be the trick,” RTMNexus CEO Dominick Miserandino shared.
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