Photo by Abenteuer Albanien on Unsplash
December 13, 2023
Will the CosMc’s Spinoff Take Off or Fall Flat?
McDonald’s plan for their retro spinoff CosMc’s has finally come to fruition, but so far, the execution is a mixed bag. The first location opened in Bolingbrook, Illinois last week, and the brand aims to have 10 restaurants open by the end of next year.
Initially, the restaurant’s concept was to use inspiration from CosMc, an alien craving McDonald’s food that was introduced as a McDonaldland mascot in the late 1980s.
CEO Chris Kempczinski stated that “CosMc’s is a small format concept with all the DNA of McDonald’s, but with its own unique personality.” He then told CBS News that CosMc’s concept is “what would happen if a McDonald’s character from the 1980s that was part alien, part surfer, part robot” opened its own restaurant in 2023.
Last year, McDonald’s saw success with this nostalgia-inspired strategy when the fast-food giant released a purple shake resembling its character Grimace. However, it’s not yet fully clear if that same nostalgia and thematic flavor has successfully carried over with the launch of CosMc’s.
CosMc’s menus will include customizable drinks to a certain extent and a mix of some of McDonald’s breakfast sandwiches, like the Egg McMuffin. The full menu has been revealed on the official CosMc’s website and showcases various flavors of drinks and unique sandwiches, minus the burger patties so far.
The dominant items on the menu are a plethora of coffee-inspired drinks alongside multiple flavored drinks and a new “McPops” snack.
Some additional options include:
- Spicy Queso Sandwich
- Creamy Avocado Tomatillo Sandwich
- Sausage McMuffin with Egg
- Bacon McMuffin with Egg
- Pretzel Bites
- Snack Box
- Cookie Butter McPops
- Apple Cinnamon McPops
- Hazelnut McPops
- Mixed Bag McPops
- Sea Salt Chocolate Chip Cookie
- Blueberry Lemon Cookie
- Caramel Fudge Brownie
- Various McFlurrys
- Various soft serve cones
The CosMc’s Conundrum With Consumers & Experts
Users on Reddit have already voiced their opinions on the new spinoff franchise. Early opinions remark that the spinoff should have stuck to the “McCafe” moniker, and if CosMc’s served all-day-breakfast, it would be a hit. An upvoted comment included a wish for all-day hash browns.
Other users are having difficulty trying to distinguish which customer demographic the food company was going for, and some note that the spinoff almost emulates a Dunkin’ Donuts. Furthermore, CosMc’s has been compared to a “down-market” version of Starbucks that has more eye-catching drinks with an appeal toward children. This further confused users who wondered what the purpose of having a McCafe is if CosMc’s will be competing with Starbucks. Another user claimed it reminded them of a “Playskool Starbucks” that nobody wanted.
Overall, it seems that plenty of consumers are already predicting the spinoff will fail, especially since it also appears many of the similar items are priced higher than a standard McDonald’s. There also appears to be an upset over the fact that while the fast-food company invested in this spinoff, regular McDonald’s restaurants no longer have a $1 menu and combo meals are increasing in price. The consensus is that consumers want a $1 value menu and are tired of paying upwards of $15 a meal at McDonald’s when they can spend that money at a more upscale eatery.
Meanwhile, according to William Blair, a renowned equity research firm, CosMc’s does not pose a significant threat to Starbucks, nor to the up-and-coming rival, Dutch Bros.
“This is a $100 billion category growing faster than the rest of the [informal eating-out segment] and with superior margins.”
Chris Kempczinski, McDonald’s CEO, via CNBC
CosMc’s, conceived to primarily attract the afternoon crowd with its flavored coffee and snacks, serves as a “learning lab” for McDonald’s internal team to devise ways to beat the infamous “3 p.m. slump.” This strategy bears a resemblance to Starbucks’ proven model of drawing in young customers with customizable cold coffee drinks, characteristically contributing to an increased afternoon footfall.
However, Sharon Zackfia, an analyst at William Blair, perceives the threat posed by CosMc’s to Starbucks as being “relatively muted.” Interestingly, she sees a more significant overlap between CosMc’s and Dutch Bros’ customer base, given their shared focus on colorful drinks and the exclusive drive-thru format.
Moreover, CosMc’s departs from the conventional drive-thru mode by eliminating face-to-face interactions. Customers can order and pay without engaging directly with staff, a stark contrast to the customer service-focused approach of Starbucks and Dutch Bros. This departure, coupled with a cautious rollout strategy, means that Starbucks and Dutch Bros. have little to worry about for now.
Visible through its three drive-thru windows is an array of syrups for both hot and cold beverages, a soft-serve machine churning out frappés and more, and busy mini ovens. As you pull into one of the four lanes, you’re greeted with, “Hello, and welcome to… CosMc’s.”
The restaurant has drawn in adventurous customers since its opening, with one even reportedly spending $104 on her order. Beyond the food, influencers are naturally attracted to CosMc’s unique concept, documenting their experiences and contributing to the organic buzz. All of this coverage is creating strong momentum for the new establishment.
During McDonald’s investor day, the company’s future prospects took center stage, but the immediate road ahead seems to be filled with potential hiccups. The company has been facing challenges due to a decline in spending from low-income consumers, a trend that is also affecting other retailers like Walmart. Adding to the uncertainty, McDonald’s has unveiled an ambitious blueprint for expansion. However, if history is any indication, such aggressive growth strategies have often not played out too well for the fast-food behemoth.
Discussion Questions
To what extent do you believe the power of nostalgia can drive success in a modern, fast-paced market that heavily emphasizes novelty and innovation? How can McDonald’s balance its nostalgic appeal with the necessity to innovate and maintain relevance in the increasingly competitive quick-service restaurant industry, particularly when facing competition from brands like Starbucks and Dutch Bros? How does this spinoff strategy align with the current and emerging trends in the retail food industry? And is this initiative cannibalizing McDonald’s own brands and offerings, particularly the McCafe?
Poll
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Melissa Minkow
Director, Retail Strategy, CI&T
Ken Morris
Managing Partner Cambridge Retail Advisors
Raj B. Shroff
Founder & Principal, PINE
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It is too early to tell whether CosMc’s will succeed or fail. Crowds on opening day are drawn by curiosity and there is no guarantee they will become long-term customers. Equally, unfavorable parts of the proposition can be tweaked and changed as McDonald’s learns more about what customers like and dislike.
Where does McDonald’s want to go with this? To a degree CosMc’s is experimental, but the concept is designed to capture a different part of the market – snacking and beverage – to traditional restaurants. That puts CosMc’s up against a lot of rivals: Starbucks, Dutch Bros, Dunkin’, and so on. However, it seems to be targeted at a younger segment of the market that is not necessarily well served by those more traditional chains. That could well put CosMc’s on the right side of trends over the medium term.
Gen Zs’ sudden passion for the Grimace shake blanketed TikTok, hinting that McDonald’s is rekindling Gen X’s love for the chain by targeting their kids. (Similar to how Stranger Things connects these cohorts.)
CosMc’s may steal market share from rivals ranging from Dunkin’ to Starbucks. Younger consumers seek fun, innovative and aesthetic drinks and snacks they can afford and celebrate online.
Confused and un”authentic” – McD’s was about a limited menu and pocketchange prices (which won’t and/or can’t return), this is what ‘desperate’ would look like…if they had a reason to be; but they don’t…they’re doing quite well, thank you. Just an experiment to be sent to the recycle bin (3 and under only, please)
While this new concept might look good on a whiteboard, I’m not sure it will hit the mark in it’s current form. Consumers will ultimately decide. The idea of creating a spin off focused on crafted beverages makes perfect sense, but the nostalgia is a bit lost on me, and I wonder if a younger demographic who this concept is supposed to attract will make the connect at all. I doubt that this new concept will impact Starbucks much at all in it’s current form, since Starbucks has a completely different feel – more mature and chill. Don’t be surprised to see much more tweaking to the CosMc’s format in months and years to come.
Nostalgia is not a raison d’être .
From a business perspective, CosMc’s will probably succeed. It will be fully automated soon, if it isn’t already. They’re smart to innovate through new concepts like McCafé and now CosMc’s, but they also need to be careful about cannibalization and brand confusion. They’ll also want to make sure that their distribution system can be rearranged as necessary to support growth across all these concepts.
Also, McDonald’s commitment to AI will make this a reality faster than prepping an order for a Churro Frappé, a Spicy Queso Sandwich, and a handful of McPops®. Of course, McDonald’s is far from stupid. So, if I want fries with that, I’ll need to drive to a nearby McDonald’s. I was hoping to hear they would go back to making fries with actual potatoes that they peel, cut, blanch, and cook. This was my first real job!
Great point about cannibalization and automation! Just like Starbucks and Dutch Bros, McDonalds has a loyal following and the extensive options for beverages and snacks should appeal to a lot of current McDonald’s customers as well as intrigue some competitors’ customers to give it a try. If the quality is a step (or two) up from traditional McDonald’s coffee, the variety and fun factor will help McDonald’s capture incremental market share from its coffee/snack competitors.
This is McDonald’s, so I suspect loads of market research has gone into these CosMc “learning labs,” but nonetheless, color me skeptical. I will let others debate the brand ethos and whether or not it reminds them of Sonic Lite. What I care about is the actual product, and the first iteration of the menu is…confusing. I’m not exactly sure who they are targeting with the menu. Are they targeting morning consumers or afternoon? They don’t really appear to be fully invested in the morning consumer with their coffee options and they don’t really feel fully invested in the afternoon consumer with the food options. Maybe they will adapt as they learn…
If you are nostalgic about McDonald’s characters from the 80’s I doubt the menu makes a lot of those 50 year old fast food lovers heading to check out the menu. Love the commitment to innovation, testing new concepts and more. I would have expected a McCafe to go right up against SBX, Peet’s, Dunkin and other regional chains. That segment is of course over penetrated thus the real estate team at McDonald’s has its hands full to find the right location to secure the kind of traffic that the investment will support.
I am ignoring the nostalgia aspect here and focusing on the comparison to Dunkin’ Donuts. I have 2 Dunkin’s within 8 minutes from my house. 4 Dunkin’s within 15 minutes from my house. Three points of the compass are covered and all four points are covered if I extend the time to 20 minutes. And any time I drive by any of them they are busy. At 7:30 – 9:00 in the morning they are crazy, traffic-blocking busy. So yes, my deep market research says that there is an opportunity here. I suspect that McDonald’s will lean heavily into their learning curve and emerge in a year or two with a success story.
I think the nostalgia angle is overblown — the drivethru-only model may be the key to CosMc’s success or failure as the concept rolls out. The extensive menu probably needs to be pruned in order to avoid excessive wait times — a well-edited offering is a key to the nearest Chick-fil-A to my house, which is also drivethru-only. Those four-hour wait times on opening day are unlikely to be repeated, but this kind of concept needs to be efficient.
One other potential benefit: Menu additions and enhancements at the huge number of McDonald’s locations, if the CosMc’s “test market” proves out.
Seems I’m in the minority, but I see a unique position for this, and I won’t be surprised if it ends up doing well. McDonald’s knows their customers better than most, so it’s safe to say this was a very calculated move. They do, however, need to keep those breakfast items available 24/7, like consumers are saying. That’s a very important element to a success formula here.
The mascot is a head-scratcher but the menu sounds promising. The public’s reaction to CosMc’s in 2024 will define its success or failure.
Why do we think it’s a competitor to Starbucks? Feels more like competition to Sonic more. We just chose to emphasize the drinks instead of the “additional options.” The signature looks like a Sonic knockoff
With CosMc’s, McDonald’s has created brand excitement by showcasing its innovation engine. CosMc’s is a brilliant marketing play that connects nostalgia and digital age convenience with an otherwordly menu. The concept creates a lot of buzz with a colorful and playful menu that doesn’t shy away from celebrating the energy pick-me-up loaded drinks in all their variations. McDonald’s has identified a growth opportunity in the snack space and is betting that CosMc’s will deliver better than the existing competition through its brand halo effect, providing a limited but fun menu and limiting the operational complexity for lower cost buildouts and staffing.
While the likes of Starbucks and Dunkin’ Donuts may not be immediately concerned given the drive-thru nature of CosMc’s and transactional technology, it will seriously harm smaller chains such as Dutch Bros. Over the longer term, all will be impacted as McDonald’s finds ways to capture more of consumers’ mindshare and disposable income.
CosMc’s is part of McDonald’s most aggressive growth plan ever aimed at opening 50,000 restaurants worldwide by 2027.
I’m sure that this concept has been on a drawing board for quite some time and McDonald’s hopes are very high that it will broaden their reach and attract new customers. But, to be honest, I’m not sure it is a winning recipe. Despite some initial hype and perhaps curiosity seekers, it will likely add confusion to the brand, cannibalize some existing McD customers, and find its way onto the cutting room floor.
If I map out someone’s day, I am not sure where this fits in. Is it for dessert, is it for cool beverages, for snacks? How many drive-thrus do I want to visit in a day? Maybe it will end up being where kids hang out after school, like they do at Sheetz in our market.
Considering the media hype and the brand work (nicely done), it sounds cool. However, I think it is a confused offering in a space where the consumer’s mental model is pretty strong into a handful of meals a day and snacks on the go. At least a brand like Smoothie King has a distinct target audience and strong brand message about its position. I don’t see there being room for CosMc over the long haul. And I am not sure what exactly they want to learn that they couldn’t have done with a traditional McDonald’s or a ghost concept.
Full disclosure that McDonald’s is a client of ours. We were not involved in this work. Obviously we wish them well and hope the goals for this concept are achieved.
Just another opportunity the industry has taken advantage of to continue to lard weight on to an unsuspecting, sedentary, public. Keep that syrup coming!!
The concept has already succeeded just by having Reddit users talking about it and brain trust members commenting about it. When you consider that McDonalds has around 40,000 stores worldwide, 10 stores for an experimental CosMcs is not a stretch, or even a drop in the bucket. McD’s is looking to compete against breakfast stores, coffee shops, Starbucks, Dunkin, and everything in between. Market research can’t compare to actual stores in the field delivering on the conceptualization. For McDs this is a research effort to find the right footprint to enter adjacent markets, increase their customer base/wallet share and tap into existing under supply in certain sectors.
In a rapidly evolving market emphasizing innovation, finding the right blend of nostalgia and contemporary appeal is essential for enduring success. McDonald’s can balance nostalgia with innovation by updating classic elements, introducing trendy items, and leveraging technology for a seamless customer experience.
By understanding and adapting to evolving consumer preferences, it can stay competitive and appeal to a wide range of customers, including those drawn to Starbucks and Dutch Bros. There’s a risk of cannibalization as CosMc’s competes with McCafe. Consumers may find it confusing, and the upscale prices may deter them. McDonald’s needs to carefully manage the coexistence of these brands to avoid diminishing the appeal of its established offerings.
I’m all for nostalgia, but I can’t say I recall past references to the CosMc character. (This is coming from a guy who can sing dozens of radio jingles from the 60’s and 70’s.)
While the juvenile branding may fall flat for me, the intent by McDonalds to introduce an alternative restaurant concept deserves our serious attention. Is this a coffee shop? I’m not so sure. Seems more like a snacks emporium featuring liquid candy, based on the menus I’ve seen so far.
The heavy emphasis on the app and drive-thru sales (four lanes?) tells me this is not an attempt to create a new “third place” for social gathering either. I’ll be curious to see how/if CosMc’s is executed in an urban walk-up storefront setting.
Time will tell whether CosMc’s turns out to be a dazzling new species or a fast-food chimera.
CosMc’s has carved out an interesting niche, and it appears appealing to Millennials and Gen Z. With a fun and whimsical drink and snacky food offering, it doesn’t really seem a head-on Starbucks competitor, nor towards anyone seriously focused on decent coffee. If anything, it has new options beyond the Dunkins breakfast and sweet donut menu, while expanding choices for the bite-sized cravings in the afternoon and late evening from a typical Taco Bell drive thru. Will be fun to watch and see what happens in the marketplace.
This makes me think of the song, “Everything Old Is New Again.” However, sometimes something old is what you need to do to attract a contemporary market. McDonald’s is reading their “audience,” and testing before going big, which is what they do with any new concept.
I would agree that it’s much too soon to determine if this test concept will be successful or not. The name and the concept could be refined and changed in countless ways before it is determined to be a success or not.
Key in my mind is that McDonald’s is trying something new and different, and seeking to play in a rapidly growing market. This aspect of retail has given rise to Starbucks, Dutch Bros, and 7Brew here in Northwest Arkansas…just to name a few. Continuing to stand by and watch others without reacting is a bad idea.
We native Chicagoans know all too well that a very tall black building with white antennas in downtown Chicago was built by people who thought that a bunch of hicks from Northwest Arkansas would never amount to anything in retail.
They were wrong.
How McDonald’s has missed yet another opportunity for 24/7 breakfast is disappointing.
While this CosMc concept had a novel inspiration, in reality, it may need more substance. The lines between the CosMc robust coffee menu and McCafe are blurred while the overall format is reminiscent of Dutch Bros. The food options seem to fall shy of what an original concept by McDonald’s could really deliver: inspiration.
I expect McDonald’s will tweak this format before expanding broadly; ideally with a more defined customer focus. I look forward to that.
Nostalgia can be a powerful force, offering a unique emotional connection. Its success depends on finding a balance with the market’s emphasis on novelty and innovation. For McDonald’s to find this balance, it must adapt to changing consumer preferences while retaining its iconic and recognizable elements. This creates differentiation, which is key to maintaining a competitive edge. With respect to cannibalizing the McDonald’s brand, of course, there is a risk, but strategic planning will help to ensure the initiative enhances the overall brand portfolio.