Stirring up the market

McDonald's challenges Starbucks with new coffee drinks, ad blitz

SAUGUS - McDonald's is upping the ante in the region's coffee wars, unveiling a new line of McCafe cappuccinos, lattes, and mochas next week and launching a media blitz promoting the golden arches' new brews and mocking its upscale rival.

McDonald's will offer the new beverages at about 215 restaurants in Massachusetts, Rhode Island, and New Hampshire on Monday and a one-week free sampling starts Sept. 22. The fast-food chain plans to plaster posters featuring the drinks across area bus shelters, subway stops, and taxis, and add television, radio, and print ads later this fall.

The premium offerings and the ad campaign behind it are the biggest efforts McDonald's has made to undercut rivals like Dunkin' Donuts and Starbucks since 2005, when the fast-food chain introduced Newman's Own Organics blend produced by Green Mountain Coffee Roasters Inc. in Waterbury, Vt.

Two new McCafe television commercials, titled "Hipsters" and "Intellectuals," take direct aim at Starbucks by featuring actors inside what looks like a Starbucks store, making fun of the Seattle coffee purveyor. In the 30-second "Intellectuals" spot, a woman sitting in a leather chair, sipping coffee in front of a fireplace with piano music playing in the background, tells her friend about McDonald's new lattes, and says, "Now we don't have to listen to jazz all day long." The commercial ends with a voice-over saying, "Try McDonald's McCafe cof fees. All the coffee. Hold the attitude."

"New Englanders have a special love of coffee. The launch of the McCafe coffees in the Boston area is the next step in making McDonald's the beverage destination for customers," said John S. Lambrechts, general manager and vice president of McDonald's Boston region. "We are doing this to meet the needs of our New England customers by bringing them premium espresso-based McCafe coffees at the convenience, and value, that only McDonald's can offer."

McDonald's hot mocha, made with espresso, chocolate syrup, steamed milk, whipped cream, and a sprinkle of chocolate, costs $2.29 for a 12-ounce cup, $2.79 for a 16-ounce cup, and $3.22 for a 22-ounce cup. The new beverages compete directly with Dunkin', which charges $2.19 for a 10-ounce mocha, $2.69 for a 16-ounce, and $3.09 for a 20-ounce cup. Starbucks, meanwhile, charges $3.10 for a 12-ounce mocha, $3.65 for a 16-ounce, and $3.95 for a 20-ounce.

The McCafe campaign in New England, one of the first regional blitzes, comes just days after Starbucks unveiled better-for-you breakfast items and launched in Boston its Clover brewing system, a sophisticated machine that turns out customized cups of coffee at a premium price of about $2 to $4.

"Coffee has become very popular in recent years, and there is a place for everyone in the market," said Austin Myerson, Starbucks' Northeast marketing manager. "Starbucks offers a specific experience, and we're out there to provide customers with the finest coffee that you can find."

Margie Myers, senior vice president of communication for Dunkin' Brands Inc., declined to comment on the McCafes, but said, "Clearly there are lots of people jumping into the coffee market. But we have a 60-year heritage as a destination for great coffee and bakery that no one else has. And we have a grab-and-go flexibility, so if people want breakfast at 5 p.m., they can still get breakfast at Dunkin' Donuts. It doesn't stop at 11 a.m."

Specialty beverages are the fastest-growing category in restaurants and have attractive margins so it makes sense for McDonald's to get a firmer grip on this market, according to John Glass, an analyst with Morgan Stanley. Earlier this week, Wendy's said it was testing a line of iced-coffee drinks as well as a beverage called the Frosty-cino at restaurants in Kansas City, Mo., Phoenix, and Pittsburgh.

Initially, McDonald's had conceived and tested McCafe as a separate building, but it is now expanding across the country in about 1,000 of its roughly 14,000 existing stores, Glass said. McCafes have their own menu board and counter area featuring the espresso and latte machine with glass containers filled with beans and a black "McCafe" sign hanging from the ceiling.

The plan is for these beverages to add 5 to 10 percent in sales, or about $125,000 to $200,000 per restaurant, Glass said, but some of the initial tests have grown sales only about 2 to 4 percent. The company expects to roll out McCafes to all US restaurants by the end of next year.

At a McCafe in Saugus, business was slow yesterday, with only three customers ordering mochas and lattes between 8 and 9:30 a.m., including two who had coupons for free drinks. Still, the drinks got rave reviews.

Chris Heitmann, 39, of Lynnfield, stopped in for an iced latte on his commute to Charlestown. Usually a Starbucks drinker in the suburbs, Heitmann said he could taste the espresso - something he can't detect in Dunkin' blends - and liked that it cost about $1 less than the Starbucks drinks.

Meanwhile, Maria Ciampa, sipping an iced mocha, described her first taste as "awesome," and said she wouldn't mind paying the extra $1 to add the drink to her breakfast routine. A longtime Dunkin' fan, Ciampa, 47, said she switched to McDonald's brews over the last year.

"I used to get breakfast at McDonald's and then coffee at Dunkin'," Ciampa said. "But McDonald's coffee has come a long way."

Jenn Abelson can be reached at abelson@globe.com.