McDonald’s McCafe pushes into grocery aisle as coffee wars heat up

“There is no better way to connect with Canadians than with a great cup of coffee,” John Betts, the head of McDonald’s Canada said.
“There is no better way to connect with Canadians than with a great cup of coffee,” John Betts, the head of McDonald’s Canada said. AP Photo/Gene J. Puskar, File

McDonald’s is coming to a grocery aisle near you.

More specifically, the fast food giant said Tuesday it will begin selling later this month its McCafe coffee in Canadian supermarkets, a move that matches rival Tim Hortons in getting so-called single serve “K-Cup” coffee into the hands of grocery shoppers.

It’s a big step for McCafe, which since the coffee brand’s launch in 2011 has been trying to draw even with Tim Hortons in the battle for the Canadian coffee lover.

And quite a bit of money is at stake.

The vast majority of coffee consumption – 78 per cent according to the Coffee Association of Canada – is done at home, not at the coffee shop or on the go.

And an increasing share of that java sipping is coming from single-serve coffee machines like the Keurig, whose sales are climbing fast against the traditional drip brewer.

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Sizing up the K-Cup market

McDonald’s said Tuesday it estimates that a third of all Canadians now own single cup brewers like Keurig and Tassimo machines.

Canadians buy roughly $750 million worth of single-serve K-Cups each year and that sum is growing as much as 25 per cent annually as the machines proliferate.

MORE: Keurig prices going up by 9% this fall, company says 

Experts say about 40 per cent of the amount Canadians spend on K-Cup coffee is at traditional grocery stores with the balance sold at coffee shops, Walmart, Costco and other retailers.

That’s a $300 million pie McDonald’s has just entered into a fight for against Tims as well as the existing players.

McDonald’s,Tim Hortons latecomers

Perhaps surprisingly, McDonald’s and Tim Hortons are late to the grocery game. Keurig brands, Starbucks and others account for most K-Cup sales at supermarkets to date, experts say.

“There’s share up for grabs both for Tim Hortons and McDonald’s,” said Kenric Tyghe, a retail stock expert at Raymond James.

Tim Hortons, which is in the process of being acquired by Burger King, has said it plans to have single-serve products widely distributed at grocery stores by the end of this year.

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MORE: Burger King confirms deal for Tim Hortons

A spokesperson for Tim Hortons, said the chain has been offering original and decaf in the single serve format in some supermarkets since June. Experts say Tims has moved cautiously in recent months but is set for a wider roll out by the end of the year.

“Dark Roast single serves will start appearing on grocery store shelves within the next couple of weeks,” Tims spokesperson Michelle Robichaud said.
“[Tim Hortons] has begun the move to offer single serve into the grocery channel and will see Canada’s No.1 coffee brand available across the major grocery retail shelves in the country in single serve format later this year,” Scotiabank retail stock expert Patricia Baker said in an Aug. 6 note.
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“Given that [Tim Hortons] is the No.1 brand and that 40 per cent of single-serve sales occur in the grocery channel, this can’t help but be a winning move,” Baker said.

John Betts, the head of McDonald’s Canada expressed a similar sentiment. “There is no better way to connect with Canadians than with a great cup of coffee,” he said.

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