McDonald's 'McCafe' Picks Up Steam, Challenging Starbucks

(MoneyWatch)  The McDonald's latte has come to Chicago -- the biggest U.S. market yet for the McCafe phenomenon. New TV ads are luring Chicagoans to the chain's newly-equipped restaurants, using promises of free sample drinks every Monday. And supposedly, the majority of McDonald's restaurants across the country will be espresso-and-froth-capable by the middle of next year.

It's a great time for it -- McDonald's has already been picking up customers from higher-priced restaurant chains as people cut down on their dining expenses. Maybe fans of high-margin luxury coffee drinks will also choose to save money by indulging themselves at McDonald's instead of Starbucks.
McCafe first launched in 1993, in Australia, and McDonald's has said that locations offering specialty coffee generate 15 percent more revenue than those without. But the company was slow to bring the concept to the U.S., upgrading just a few test sites in 2005.

Now it looks like they're ready to go full-steam ahead; McCafe's have been turning up in more and more areas for the past few months -- and RBC Capital Markets said McDonald's took market share from Starbucks for the first time ever in November.

A Chicago Tribune reviewer ranked the McDonald's latte as better than drinks from Starbucks or Dunkin' Donuts -- but only if she ordered it without extra sweeteners. Other bloggers have been less impressed.

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• Is Starbucks Coffee Actually That Good?
• Starbucks and McCafe Bring it On with New Ads
• More Bad News for Starbucks as McCafe Moves in For the Kill
• Starbucks No Longer a Luxury?
• Starbucks, Dunkin' Donuts, McDonald's: Coffee Rivals Fight Breakfast War