TYLER, TEXAS — Every day at the Distant Lands Coffee roasting plant here, a river of green coffee beans is transformed into espresso, fuel for McDonald's Corp.'s boldest gambit in decades.
Distant Lands' Russell Kramer was skeptical at first that it would ever happen. Could the burger giant really be serious about selling cappuccinos? A bike ride with a McDonald's executive through the coffee-tree-studded mountains of the Indonesian island of Sumatra helped convince him that it was.
Kramer knew that signing on as McDonald's lead espresso provider meant the Renton, Wash.-based coffee company would have to hew to rigorous rules aimed at making sure the world's best-known restaurant chain would never suffer a supply-chain breakdown. He also knew that the payoff would be huge if the restaurant's foray into the world of espresso were to succeed.
When per capita milk consumption rose in 2006 for the first time in 20 years, McDonald's was a prime reason, said Chris Moore, a senior vice president at Dairy Management Inc., the marketing arm of the U.S. dairy industry.
That's because two years earlier, McDonald's had introduced milk in resealable plastic bottles, a hit with children and a practice the rest of the fast-food industry then adopted, he said. The dairy industry is counting on the same sort of effect from McDonald's espresso coffee drinks, which can contain up to 80% milk.
"We believe this will be a huge growth driver for the dairy industry," Moore said.
Analysts say the same will happen for the coffee industry -- if McDonald's espresso experiment succeeds.
The fast-food giant's coffee venture is an attempt to solidify a sub-brand called McCafe. Retrofitting a McDonald's restaurant to accommodate specialty coffee and other new beverages can cost as much as $100,000. Yet it's far from clear that consumers will come to equate coffee with McDonald's like they do Big Mac burgers.
The Oak Brook, Ill., company won't release any data, but ever since the McCafe launch two months ago, sales of the chain's espresso-based coffee drinks have met expectations or exceeded them in some markets, said Neil Golden, McDonald's chief U.S. marketing officer. A marketing push beginning Monday will feature free hot or iced mocha beverages every Monday until Aug. 3.
Kramer first got a whiff of McDonald's grand coffee plans in late 2003 when he received a phone call from Danielle Paris, McDonald's U.S. senior group manager for product innovation.
