McDonald's pours on the iced coffees

By The Wall Street Journal

In a sign of how it is democratizing upscale coffee drinks, McDonald's is using Chicago Cubs and White Sox players to pitch a new line of iced-coffee drinks throughout the Windy City this summer.

The fast-food chain this week will begin selling plain, vanilla and hazelnut iced coffees at 700 locations in and around Chicago. The drinks have been sold in some outlets in New York, Boston and other cities for a few months. To promote the drinks, McDonald's (MCD, news, msgs) has displayed coffee mugs frozen in ice in Seattle and passed out free coffee at Boston locations.

• Video: New niche marketing from McDonald's

The move is part of a bigger effort at McDonald's to turn the world's largest restaurant chain into a destination for drinks, not just food. Since its founding, McDonald's beverage lineup has consisted mostly of milkshakes and Coca-Cola (KO, news, msgs) sodas that complement its hamburgers and french fries.

But the growth of Starbucks (SBUX, news, msgs) and the popularity of new noncarbonated drinks sold in bottles have prompted McDonald's to rethink its beverage offerings. In a few restaurants, McDonald's is testing noncola drinks in bottles made by PepsiCo (PEP, news, msgs) and other companies, and it is selling a full line of cappuccinos and lattes at outlets in Michigan.

• Get free, real-time stock quotes on MSN Money

"We look at the beverage business as a tremendous opportunity," says Don Thompson, the president of McDonald's USA. "Our goal is to move from strictly beverages as an accompaniment . . . to beverages being more of a destination."

The Chicago iced-coffee campaign will heavily market a product that hasn't seen a lot of traditional big-budget advertising. McDonald's plans to pitch the drinks by putting ads on the public transit system and at concert venues as well as running a full slate of television commercials, particularly during programs geared toward young adults. It also plans to put the ads on cocktail napkins inside Chicago bars this summer and pass out iced coffee samples at the Accenture Chicago Triathlon and other races.

Starbucks, by comparison, does little traditional advertising. Starbucks spent $38.5 million on advertising last year, compared with $781.7 million across the menu at McDonald's, according to TNS Media Intelligence. Rival Dunkin' Donuts, which sells specialty coffees and launched a big TV ad campaign last year, spent $107.9 million in 2006, according to TNS.

The evolution of iced coffee

Publicis Groupe's (PUB, news, msgs) Leo Burnett created 15- and 30-second television spots for the McDonald's iced coffees that play off Chicago's crosstown baseball rivalry. In one spot, Cubs catcher Michael Barrett lays mousetraps beside the bed of White Sox right fielder Jermaine Dye, who climbs out of bed only to get his toes snapped.

In another, White Sox catcher A.J. Pierzynski sneaks up on Cubs pitcher Carlos Zambrano while he's asleep and waxes off his left eyebrow. "Wake up the rivalry, and wake up to McDonald's new iced coffee," the ads say.

McDonald's says it is aiming the ads at consumers ages 18 to 34, a younger demographic than customers of its hot drip coffee. McDonald's won't say how much it is spending on the campaign but says it will be one of the chain's larger ad campaigns in Chicago this summer.

"As you look at the evolution of iced coffee, it did start off as sort of an upscale drink," says Rob Jackson, the marketing director for McDonald's Chicago region. But with lower prices and a humorous marketing campaign, McDonald's wants to convey that the "product is available and accessible," he says.

• Video: Can coffee harm your health?

McDonald's will sell all flavors of the coffees in sizes medium and large for $1.69 and $1.99, respectively. Coffeehouses can charge more than $3 for similar sizes of iced coffee and often charge for adding flavors.

The iced coffees mark the latest step in McDonald's effort to upgrade its brew. McDonald's used to sell 62 kinds of drip coffees until it launched a "premium roast" at its restaurants last year.

Most McDonald's restaurants don't have the machinery to make espresso, which many specialty coffee shops use to make iced-coffee drinks. So McDonald's formulated its drip coffee into a stronger concentration that runs through its existing coffee makers.

One of the biggest dangers of adding a product to the McDonald's menu is that it can potentially slow down service. To avoid that, coffee suppliers helped conduct "exhaustive" tests of the drinks and trained workers to make them in as quickly as 20 seconds, says Bill Wolf, a senior vice president of S&D Coffee, one of McDonald's main three coffee suppliers. "You can do this very expeditiously," he says.

McDonald's won't say when it plans to start selling lattes and cappuccinos at more locations. But the company's Thompson says the world's largest restaurant chain plans to be a much stronger player in specialty coffee.

"We don't today have a lot of that market, and so we're going after it fairly aggressively," he says.

This article was reported and written by Janet Adamy for The Wall Street Journal.