McDonald’s (MCD) is increasingly becoming a fast beverage stock instead of a fast food stock. And with the non-alcoholic beverage business in the U.S worth $153 billion, there are plenty of profits to share with restaurants like Starbucks (SBUX), Burger King (BKC), Caribou Coffee (CBOU) and others.
McDonald’s latest effort to cash in on beverage sales include smoothies and iced frappes as part of its already impressive suite of McCafe gourmet coffees. MCD stock smoothie flavors include wild berry, strawberry banana, mango and strawberry flavors at select locations.
This is just the latest chapter in the race for beverage sales among restaurant stocks like McDonald’s. Other recent developments include:
- Burger King brunch now offered at select locations
- SBUX and BKC partnering to sell Seattle’s Best brand coffee at Burger King
- SBUX stock making a low-priced push with a discount coffee brand
- BKC stock offering $1 Icees at Burger King locations this summer
- McDonald’s earnings boosted by its McCafe line of coffees
It’s no secret why restaurant stocks are focusing on drinks. These are high-margin products, providing the biggest bang for a company’s dollar. Starbucks has seen big success thanks to this trend, and Burger King and McDonald’s would be crazy not to pursue similar profits.
As for smoothies at McDonald’s Corp. locations, the rollout is limited right now. However execs at McDonald’s are enthusiastic after out iced frappes at its restaurants since March. According to McDonald’s, the company’s recent +3.8% boost in same-store sales was due in part to the sale of iced coffees and frappe drinks.
With a market cap of over $75 billion, MCD stock doesn’t have many more growth opportunities out there. The success of McCafe specialty coffees breathed new life into McDonald’s shares and sparked a rally that helped shares double over the last five years despite the mayhem in the broader market and the relative sluggishness of other blue chip stocks. A similar reinvention in necessary to keep up the momentum for MCD stock.
As of this writing, Jeff Reeves did not own positions in any of the stocks named here.
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