iStock.com/Joe Hendrickson
May 29, 2024
Will CosMc’s New App and Customizable Beverages Make McDonald’s Spinoff a Hit?
McDonald’s has ventured into new territory with the launch of CosMc’s, a spinoff brand aimed at capturing the beverage and snack market favored by younger consumers. Since its introduction, CosMc’s has opened four locations, with more on the horizon. The initiative is a strategic move by McDonald’s to diversify its portfolio and compete with popular chains like Starbucks and Dutch Bros.
CosMc’s draws inspiration from a lesser-known McDonaldland mascot, CosMc, an alien character with a fondness for cheeseburgers. The brand’s focus is on customizable drinks and coffee, catering to the growing trend of beverage consumption as a form of affordable indulgence. This strategy aligns with insights from Katie Belflower, an editor at restaurant research firm Technomic, who told CNBC, “With beverages, you can get really creative, without necessarily having the product lines that you would have to invest in with food.”
The first CosMc’s location opened in Bolingbrook, Illinois, in December 2023, with three additional locations in Texas. By the end of 2024, McDonald’s plans to have 10 CosMc’s locations, nine of which will be in Texas, using this phase to test the concept’s viability.
CosMc’s menu offers a high level of customization, with options for adding vitamin boosts, energy shots, or various syrups. This degree of personalization, however, would be challenging to implement at a traditional McDonald’s due to the potential for slowed service. Digital menu boards and a new mobile ordering system are expected to mitigate these issues and improve overall efficiency.
Despite the initial hype, the novelty of CosMc’s seems to have waned. After the initial rush, drive-thru lines have shortened and service times have become more manageable. According to Intouch Insight, mystery shoppers reported an average wait time of over 11 minutes from entering the drive-thru to placing an order, with a service time of just over four minutes, slightly lagging behind industry standards.
The Bolingbrook location features a drive-thru-only model with four lanes and a simplistic exterior. Notably, the branding does not heavily feature the CosMc mascot, perhaps due to its relative obscurity among the younger target demographic. Instead, the focus is on the extensive menu, which includes unique offerings like Sour Cherry Energy Burst and Popping Pear Slush, alongside coffee drinks such as the Churro Cold Brew Frappe.
Furthermore, McDonald’s recently introduced a nationwide mobile app and loyalty program for CosMc’s. The app, available on Apple’s App Store and Google Play, offers a range of features, including a loyalty program, order-ahead options, and personalized drink preferences.
Despite its limited physical presence, the new app aims to enhance the customer experience by offering perks such as a free drink upon signing up, birthday treats, and the ability to earn points with every purchase. Customers earn 10 points per dollar spent, with 400 points translating to a $2 reward.
However, the rollout of a nationwide app for a brand with such a limited footprint raises questions about timing. The Bolingbrook location, intended as a testing ground, has struggled with long wait times, which the app’s order-ahead feature could potentially mitigate. Yet, with only four locations, the app’s utility is currently restricted to a small user base.
McDonald’s acknowledged this limited reach but made the following statement via email: “CosMc’s is excited to offer the app to our existing customers to provide a convenient customer experience and also allow them the option to join our loyalty program.”
The broad launch of the app might seem premature, but it aligns with CosMc’s strategy to refine its offerings and enhance customer engagement in preparation for future expansion.
The experimental nature of CosMc’s functions somewhat like a safety net that allows McDonald’s to explore new market segments with minimal financial risk. Even if the spinoff does not expand beyond the initial test phase, the insights gained could prove invaluable. McDonald’s past experience with secondary brands, such as the acquisition and eventual sale of Boston Market, highlights the importance of strategic focus.
Discussion Questions
Given the rapid rollout of CosMc’s loyalty app despite limited physical presence, what are the potential benefits and drawbacks of launching digital engagement tools early, particularly for customer experience and data gathering?
With CosMc’s focus on customizable beverages, what operational challenges and innovations might arise in balancing speed of service with personalization, and how could these lessons apply to larger fast-food chains?
Poll
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Melissa Minkow
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It is far too early to make a call on whether this is a success story. CosMc’s is a minuscule part of McDonald’s business, and it is still in the testing phase. The company will open around 10 outlets in various markets to see what it can learn and to assess what the numbers look like. If CosMc’s drives incremental volume and can deliver a return on investment that is better than a traditional McDonald’s outlet then the concept might be taken forward in a more serious way; if not, then it will likely fizzle out as McDonald’s will direct its time and money elsewhere. Ultimately, however, McDonald’s is absolutely right to test a new concept and see whether a different format has legs.
Agree with Neil far too early. However, early digital engagement through loyalty apps can enhance customer retention, gather valuable data, and refine the customer experience. The only risk I see is potential technical issues and inadequate physical support infrastructure, which could harm initial user experiences. Operationalization is key here.
I agree it’s too early , but I have seen big crowds when they opened the locations in Texas. More curiosity than anything else. If the customers can see the perceived value then it can be successful. If the customers that visit can’t see it (like the regular McDonald’s currently), then it’s a failed concept. Time will tell.
Yes, it has attracted a lot of interest. McDonald’s has made it clear that it’s not just about sales. The format has to deliver a return that’s equal to or better than a traditional McDonald’s to be taken forward in a serious way.
There’s no harm in testing a new concept, and McDonald’s has invested time and effort into CosMc’s. It’s particularly smart to aim at Gen Z…the days of the older customer with a hamburger and a small coffee are probably drawing to a close.
Historically, McDonald’s has been fairly sharp with go-to-market strategy, and not being afraid to take…creative risks. CosMcs is one of those creative risks. I generally applaud strategic and creative risks, especially where the learnings can be used to sharpen your next effort. I am already waiting for McDonald’s next effort. I expect it will be impressive.
Despite the initial hype, the novelty of CosMc’s seems to have waned. Don’t ya hate it when somone tells how the movie ends? But let’s back up a moment and ask how we got to this point: the casual observer – jumps up waves his arms – might ask why one of the world’s best known brands wants to present itself in (slightly) different colours. Is it a sign of conceit – we’re so strong our logo alone can carry a concept – or a candid admission that however popular it may be, McD’s also has a lot of detractors?
Restaurant companies know that an extensive menu means escalating food cost. CosMc’s selection of basic yet infinitely customizable beverages and limited food options like Egg McMuffins, trendy sammies, and cookies allows controlled COGS, which should translate into solid profits. But let’s just call it what it is: this is McDonald’s version of a convenience store for youngsters. With menu items like Sour Cherry Energy Burst, Signature Galactic Boosts, and Island Pick-Me-Up Punch (with 301mg of caffeine in a large–yowza!), this is clearly a play for a younger demo. (To all my fellow BrainTrusters, open invite for a field trip to visit one of the Dallas stores!)
Benefits of CosMc’s launching digital tools include heightened brand awareness, anticipation and consumer demand for expansion. The main drawback is consumers’ disappointment if CosMc’s is unavailable in their area.
Customization takes time. Digital ordering boards, mobile apps and ordering ahead streamline order management. Loyalty data can help customers quickly reorder items. Efficiently managing the in-store operations of all those orders is the top challenge and opportunity.
Let’s put some numbers in perspective. When McDonald’s announced CosMc’s at the end of 2023, it also shared plans to open 10,000 locations worldwide over the next four years to reach 50,000 restaurants. Competitors like Starbucks have also announced store growth from the current 38,000 locations to 55,000 by 2030. Through 2025, CosMc’s will have no material impact on McDonald’s financial results; however, depending on the learnings from the pilot locations, an aggressive buildout in 2026 and beyond can’t be discounted.
CosMc’s 10-store pilot is an experiment that will take the company at least a year of operations to thoroughly test the concept and identify key success factors. McDonald’s identified an afternoon lull in sales and believes CosMc’s can address it with its festive and personalized Galactic Boosts and Energy Bursts.
More than any other food/beverage operation, McDonald’s branding power is built upon process-driven operations where repeatability and reliability of outcomes are sought and optimized. While a dedicated app may seem overkill for a 10-store pilot, it is a must to deliver on the brand promise and fully vet the concept for both internal operations and customer experience.
McDonalds has definitely identified a proper strategy to market the spin-off to younger generations, because no doubt, Starbucks has been capitalizing that way with the same types of drinks for several years.
But what we don’t know is whether or not CosMc’s will get close to Starbucks’s quality and standards, or if instead this presentation will be strictly “cheaper” but not better, in the same way McDonald’s coffee offerings were, in comparison to Starbucks. Db
Starbucks, Dunkin’, Dutch Brothers, Peet’s and Caribou have loyal customer bases and convincing consumers to switch brands to CosMc’s is a tall order. The CosMc’s app is easy to use and consumers are accustomed to using mobile apps for coffee and fast food order. I am concerned about the total order time of 15 minutes for a cup of coffee (11 minutes from entering the drive-thru to placing an order, with a service time of just over four minutes). That cup of coffee better be fantastic or consumers will find a more convenient option.
I applaud McDs effort. However, I wonder if this effort was thrown together without thought of operational efficiency. In the QSR category, Q is the first word. I imagine the meetings in developing this concept was full of ideas, with all the ideas cumulated and dropped in the bucket to execute. Let’s hope they don’t open store #5 until they understand what they are doing.
So one of their focus points is beverage consumption as an indulgence–“a growing trend”. This is parody right? Hasn’t Starbucks been in the “beverage as an indulgence” space for, what, 25+ years?
The store design is interesting, however for a loyalty program to really work well you need a LOT more than four stores. The app has promise but they need to open a lot more of these in order to really understand if they have a success on their hands.
There’s little to no downside risk in launching digital tools like CosMc’s loyalty app. The data they get from this will be extremely valuable, even if the CosMc’s store count doesn’t grow to significance. In my many travels to customers across the US, I’ve seen some very cool beverage concepts that are taking share from big chains like Starbucks, Caribou and McDonald’s. These smaller, nimble and innovative concepts are a draw to consumers because of their cozy, local vibe. If CosMc’s can replicate this feel, they could be extremely successful. Time will tell.
So they are focused on “beverage consumption as an indulgence”? Is this parody?-hasn’t Starbucks been in that space for, what, 25+ years?
The design of the stores is compelling, however your really need a lot more than 4 stores before you understand if the loyalty program and the app are winners. It will be interesting to see how this rolls out.
In today’s crowded fast food market, and with consumers pulling back on eating out in general, it’s a good idea to try new and innovative concepts, especially with a small test and learn approach.
CosMc’s are not Starbucks. The real test will occur when they open these in multiple states, for a longer period of time. The coffee and drink customer will probably not wait for 15 minutes in a drive thru, when their experience is faster almost every where else, including QSRs, gas stations, and more established brands like Starbucks. Only time will tell once there are more CosMc’s opened in more locations.
I like the emphasis on personalization, but I wouldn’t have made a separate app for this venture. Having CosMc ordering and offerings in a particular section within the McDonald’s app would help drive awareness and avoid the need to persuade consumers to download another app (which they rarely like to do).
One of the great things about the CosMc’s app is that testing, trial and error is naturally built into customer experience. By letting a high level of customization rule the sales process, so much more can be learned about flavors and taste profiles and preferences compared to a full-on new product launch commitment.
McDonald’s ultimately wins here, because whether CosMc’s grows into another strong business unit or falls flat, the learnings here can be incorporated back into the Golden Arches of the mother ship if needed. Either way, its a springboard for new sales and customer insights.
The key to successful testing isn’t the test store, it is the technology and concept and see what survives standalone and what can be wrapped into McDonalds in the future. It is good to see McDonalds experimenting though …. It is okay to fail as concept stores, that’s what they are for. “unscheduled disassembly” is not a bad thing.