When McDonald’s (MCD) released its newest fruit smoothies as part of the popular McCafe product line, consumers flocked to the golden arches. So much so that McDonald’s officials have decided to cancel a nationwide free taste test of the products, due to concern that the fast-food chain would run out of the berry concoctions.
While the sale of McDonald’s smoothies officially began last week, certain locations have been offering the fruity beverages for some time earlier and have seen great success. McDonald’s chief marketing officer has referred to the smoothie line as “an absolute hit” with “unprecedented demand.”
Yes, but how much of that demand was due to the free samples? While consumers may be enjoying their wild berry smoothies now, they will no longer enjoy the free samples that were scheduled for July 22 to July 24. Apparently, McDonald’s fears that certain restaurants will run short on the fruit-flavored ingredients, leaving customers with only trial-sized portions.
The smoothies are an addition to McDonald’s widely popular McCafe line, which features various frappes, lattes and cappuccinos. Despite the fact that McDonald’s launched its McCafe products during a recession, the fast-food giant has been satisfied by the new line’s production. Experts point to the fact that McDonald’s is a cheaper option compared to competitors like Starbucks (
SBUX). And when pinching pennies, a daily $4 drink from Starbucks is one of the first luxuries to go.
While McDonald’s McCafe products are cheaper than competitors’, customer feedback and sales indicate that the mocha treats are every bit as delicious as their more expensive counterparts. The smoothies appear to be another creative way for McDonald’s to diversify its image and menu.
The broader markets may be down on the year, but McDonald’s has continued to see economic growth, and has outperformed analysts’ earnings estimates each of the last three quarters. Likewise, experts are predicting McDonald’s to earn $1.12 per share this quarter, after earning $1.03 last quarter.
Lowered prices and expanded opening hours have been cited as reasons for McDonald’s continued climb and in May the company reported that same-store sales (restaurants open at least one year) had risen 4.8% worldwide.
Consumers may not be initially happy when hearing about the cancelled free smoothie promotion, but it’s doubtful that this little hiccup will affect McDonald’s earnings in the long run. With the previous success of other McCafe products, the smoothie release should continue to boost the fast-food chain’s sales, particularly during hot summer months.
That could be great news to investors looking for McDonald’s to build on the success of its McCafe line with another high-margin specialty beverage.
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