February 14, 2013
Can BK Gain Territory in the Coffee Realm?
Whether Burger King is doing a Starbucks or McDonald’s me-too doesn’t matter nearly as much as how well the fast food chain executes against its newly announced plan to double the number of premium coffee drinks it sells to 10.
The new line will include lattes and flavored hot and cold beverages developed by Seattle’s Best Coffee. A cup of Smooth Roast Coffee made with 100 percent Arabica beans is priced at $1, while the iced coffee version, which comes in four flavors, will sell for $1.49.
Eric Hirschhorn, vice president of global innovation at Burger King, told Nation’s Restaurant News, "Continuing to innovate and improve the Burger King brand’s coffee and beverage platforms are among our top priorities for the year."
Sales of specialty coffees such as lattes grew six percent last year, according to NPD Group. Dollar sales of regular coffee were up two percent.
One key motivator for restaurants to develop strong coffee programs are the profits associated with success.
Malcolm Knapp, a restaurant industry consultant, told USA Today, "They’re a lot more profitable than cheeseburgers or fries."
Discussion Questions
What will it take for Burger King’s coffee program to succeed? Are coffee drinks a market opportunity for retailers, as well?
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While late to the party, Burger King needs to make this change. McDs has changed the paradigm for fast food coffee forever. BK’s efforts in premium coffees and its added lattes and flavored hot and cold beverages apparently are a me-too, delayed response.
BTW, Seattle’s Best is also the branded coffee of Subway—another second for Burger King.
Historically for QSRs, the drink has always been the tail; the meal was the “dog.” The meal drove the traffic and the drink was treated as the ancillary item. The change really began way back when Starbucks clearly demonstrated that coffee could be a destination driver; something the c-store world had known for some time. McDonald’s was the first QSR to see what coffee could do for traffic. Sonic did the same thing for cold drinks.
The good news for Burger King is that McDonald’s has changed the perception of QSR coffee making it somewhat easier for Burger King’s entry into the upscale, specialty coffee market. BK also has the added plus of using a brand, Seattle’s Best, that has a presence in the market. They will have to apply the same marketing and execution levels as McDonald’s, Starbucks, etc. have done in order to succeed.
This falls into the “why not?” category. As long as the move drives incremental sales and profits and (perhaps) more breakfast traffic, it makes sense. However, to Steve’s point about successful marketing, BK has a long history of weak targeting and inconsistent branding. It’s not hard to be skeptical about this latest move.
Burger King has already taken the first step necessary in making the coffee game work…they will be delivering a better product with the Seattle’s Best brand. Past attempts at a “freeze dried” coffee were dismal.
In the QSR business, as in other restaurant channels, coffee drinkers often are seeking a certain ambiance. Burger King is going to have to brighten up their stores to drive consumers in for the experience. Strong marketing support is necessary, and a commitment to stay the course for the investment that franchisees will place in the stores.
Based on the November, 2012 Prosper Insights & Analytics monthly survey, Burger King falls well short of the Starbucks, McDonald’s, IHOP, Denny’s Tim Horton, Dunkin’ Donuts, and Panera Bread crowd when it comes to breakfast and coffee purchase decisions.
The positive news for Burger King is that nearly 6 out of 10 consumers express a “No Preference” for where they purchase coffee in the morning. For coffee lovers, having a “home” for that morning cup of joe—be it home or on the road—can become a consistent habit. Traffic and ticket are vital for Burger King.
Outside of Miami, most of the Burger Kings I’ve visited look like a greasy spoon diner. It is going to take a top-down redesign of their restaurants to attract the premium coffee drinkers.
McDonald’s changed their entire interior design to reflect a place where customers can sit down and enjoy coffee and free WiFi.
Wendy’s and Yum Foods improve their interiors to keep up with McDonald’s. Burger King still has a long way to go to catch up in this arena if they still wish to be relevant.
“They’re a lot more profitable than cheeseburgers or fries.”
Not if you don’t sell any! I’m not sure what the typical demographic of Burger King is—I’ve heard it’s young males—but I’m having a hard time picturing one of them with anything but a 22 oz. soft drink in their hand.
One of BK’s problems is that, unlike McDonald’s or Wendy’s (or any other eponymous chain), it’s typecast by its name. No matter what they try, you think of burgers. And of course it doesn’t help that what they try often isn’t very inspired. Pile on years of ownership issues, and the ever present “war” on obesity. And…where were we? Oh yeah, good luck guys.
Have you ever seen companies that are so far behind the curve that they may never catch up? Well Burger King might fall into that category. Coffee has been a BIG deal for over 20 years and Burger King has just decided to “jump on” this “trend”!
I really don’t think that anyone is going to make a special trip to Burger King just to buy coffee. The King’s problems are just too big for coffee to cure. However, with some cleaver advertising and the addition of some coffee house granola and bran muffins they might be able to grab some business from the Starbucks line.
This is a defensive move on the part of BK to try and stem some serious erosion. As to coffee being a market opportunity, I can only say that I see coffee shops opening and closing every day. Seems to be a tough niche to break into unless you are located in the North West!
There is nothing wrong with “me-too” approaches if executed well. Where a BK location is more convenient than a McD’s, it will be a welcome alternative. And for those who prefer the food, even better!
No, it won’t work. Read Focus by Al Ries to learn why.