McDonald’s (MCD) reports earnings this Wednesday, July 23rd, and shareholders are worried about espresso sales. Now that Starbucks (SBUX) is closing 600 stores, this probably isn’t the best time to be in the luxury coffee market. And the current data available isn’t helping MCD’s cause (WSJ):
McDonald’s sales data suggest that these specialty coffee drinks, now in at least 1,700 locations, aren’t selling well. A chart of the six major areas where the company is selling the drinks shows that sales in most markets peaked about three weeks after the drinks launched, then declined in the following weeks, in some cases sharply…
In Kansas City, Mo., for instance, the average number of specialty coffee drinks sold per restaurant peaked in early December at 359. As of the last week in June, that average had fallen to 217.
If McDonald’s new coffee drinks fail, we can already hear their defence:
- Hot drinks don’t sell well in the summer.
- Just wait until we start marketing!
- Once gas comes down, the drinks will sell like hotcakes.
- The new beverage-counter renovations may be expensive, but wait until next quarter…when we’ll have less Starbucks to compete with!
MCD has remained resilient in the face of a recession as consumers trade down because of its cheap prices. So unfortunately, McDonald’s may have picked the wrong time to go upmarket.