Paul Ziobro writes in the Wall Street Journal that McDonald’s Corp.’s summer sales may get extra juice with a push to sell all soft drinks, no matter the size, for $1.
McDonald’s executives have been trying to sell franchisees on the offer in recent weeks at regional meetings, where Coca-Cola Co. representatives have also pressed the case for $1 drinks, according to two franchisees.
McDonald’s has been asking franchisees to increase $1 drink offers this summer.
McDonald’s, aiming to become a destination for buying beverages, has used dollar-drink promotions in summers past, with most markets opting to sell large sweet tea for a buck last year. But the franchisees say the fast-food chain is making a greater effort this year to get more markets—which have the final say on any offer—to sell all fountain drinks for $1.
McDonald’s also wants the $1 drink promotions to run 150 days, starting after Memorial Day, up from 100 days in prior years, the franchisees say.
McDonald’s spokeswoman Danya Proud declined comment on any conversations between the company and its restaurant operators. She said more than 90% of U.S. restaurants sold drinks for $1 last summer, which “should give you an indication of its success for our business.”
The $1 drink prices are discounts from suggested prices of $1.39 for a large soda. Some experts estimate profit margins run at about 90% for sodas at restaurants, leaving some room to maneuver on price. Still, franchisees worry that discounting drinks, sales of which typically compensate for discounts on other products, could hurt the bottom line, especially if customers buy other items from its Dollar Menu.
“We can use the sales, but these are very costly sales to get,” said one McDonald’s franchisee.
McDonald’s hopes the promotion will steal customers from other fast-food chains and from other places where consumers buy drinks like 7-Eleven and Circle K convenience stores. The added customers could also help McDonald’s introduce customers to its new beverage lineup, including smoothies and frappes—blended, icy coffee drinks—both set to debut nationally around midyear. Cold sodas can also attract customers during afternoon hours, a time when smoothies and frappes sell well.
McDonald’s says its beverage play is paying off. McCafé espresso-based drinks have helped make coffee 5% of total sales, double what they were in 2006, while the company is on track to top a goal of adding $125,000 a year in per-store sales by adding new beverages.
Read More at: Wall Street Journal