A day after Taco Bell rolled out its new breakfast marketing campaign, McDonald’s (NYSE: MCD) fired back with a tried-and-true loss leader: something for nothing.
In this case, the freebie is a 12-ounce cup of coffee, which not only takes a shot at Taco Bell but also at Dunkin’ Donuts and Starbucks, both of which have been gaining market share.
The free coffee announcement by the world’s biggest restaurant chain comes on the the heels of another major development designed to lure more customers to its breakfast table. McDonald's is finally considering serving breakfast past 10:30 a.m.
Related: Taco Bell’s Clever Campaign to Eat McDonald’s Breakfast
The company reported flat quarterly earnings in January, with a profit of $1.397 billion, up from $1.396 billion a year earlier. Per-share earnings grew to $1.40 from $1.38 in the same period. In an improving but still uncertain economy, investors are watching closely after McDonald’s streamlined its operations and repurchased shares. In March the company reported that same-store sales in February fell 0.3 percent as its U.S. business slumped for the fourth month in a row, partially because of harsh winter weather.
Despite its competitors – both old and new – in the breakfast arena, McDonald’s currently claims 31 percent of the category, says market research firm Technomic. Breakfast comprises some 20 percent of McDonald’s U.S. sales. It first launched a breakfast menu back in 1975.
Last year, fast food and quick-grab breakfast sales rose over 5 percent to $27.4 billion, according to research firm Mintel’s analysis of Bureau of Labor Statistics data. In recent years, McDonald’s has struggled to spark sales as competitors such as Wendy’s and Burger King offered crowd-pleasing menu items and limited-time offers.
The coffee giveaway is “McDonald’s way of encouraging new guests to try McCafe Coffee while giving our breakfast lovers even more reason to enjoy the great taste of our signature blend,” Greg Watson, a senior VP at McDonald’s U.S, said in a statement Friday. The company launched its McCafe line in 2009 and has tried positioning it on a par with Starbucks. In the last few months, it’s also tested grocery store sales of its premium roast coffee.
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