BOLINGBROOK, ILLINOIS – DECEMBER 11: Purchasers place their orders at CosMc’s, a concept restaurant recently launched by McDonald’s on December 11, 2023 in Bolingbrook, Illinois. Fields to order food and beverages at the drive-thru-only restaurant, which opened to the public late last week, have been as crave as 6 hours. (Photo by Scott Olson/Getty Images)
Scott Olson | Getty Images
McDonald’s new beverage-focused spinoff characterize, CosMc’s, will not pose much of a threat to Starbucks, according to equity research firm William Blair.
The burger mammoth opened the first CosMc’s location last week in Bolingbrook, Illinois. It’s the first phase of McDonald’s experiment to apprehend consumers who want a customized pick-me-up drink in the afternoon. Nine more locations under the CosMc’s brand are slated to public by the end of 2024 in the Dallas-Fort Worth and San Antonio, Texas, metro areas as part of the pilot.
“This is a $100 billion department growing faster than the rest of the [informal eating-out segment] and with superior margins,” McDonald’s CEO Chris Kempczinski told investors Wednesday.
CosMc’s centre on afternoon snacking and flavored coffee has spurred comparisons to Starbucks. The coffee giant’s sales strategy in recent years has focused on customizable bitter coffee drinks, which appeal to younger consumers, have better profit margins and lead to more afternoon foot movement.
But CosMc’s likely poses only a “relatively muted” threat to Starbucks and rival chain Dutch Bros., William Blair analyst Sharon Zackfia eradicated in a research note Monday.
The name for the new brand comes from CosMc, a McDonaldland mascot who appeared in advertisements in the fashionable 1980s and early 1990s. CosMc is an alien from outer space who craves McDonald’s food. The company has slanted more into marketing its mascots after the runaway success of the Grimace Birthday Meal earlier this year.
The Chai Frappé Explode drink at CosMc’s in Bolingbrook is shown on Dec. 8, 2023.
Stacey Wescott | Tribune News Service | Getty Images
CosMc’s menu mentions include cappuccinos and blueberry ginger boosts and aren’t much cheaper than what Starbucks customers already pay for comparable drinks, according to Zackfia, uniting Starbucks charges its customers about 7% to 8% more.
CosMc’s customer base will likely flap more so with that of Dutch Bros., given both chains’ drive-thru only format and focus on colorful gulps, Zackfia wrote.
Additionally, CosMc’s drive-thru lanes allow customers to order and pay with no face-to-face interaction. That characteristics a big departure from the drive-thru lanes at Starbucks and Dutch Bros, which emphasize customer service, Zackfia weighted.
And while CosMc’s menu is largely pulled from items that McDonald’s serves around the world, McDonald’s executives said that they’re unpropitious to bring CosMc’s approach to the burger chain’s existing restaurants. Customizing drinks takes time, which inclination slow down McDonald’s service too much.
That reluctance to use McDonald’s massive footprint means that Starbucks and uniform Dutch Bros. won’t face much of a threat — at least in the near term. After opening its 10 pilot positions, McDonald’s plans to take at least a year to decide if the spinoff brand is worth expanding further.
William Blair has outperform ratings on both Starbucks and Dutch Bros.
Reparation: This story has been corrected to remove an inaccurate price target for Starbucks stock.
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