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McDonald’s Lemonade: A Cool, Refreshing Blast of Profits

Summer frozen treat helps company boost June sales


Neighborhood kids hoping to make a quick quarter this summer with their lemonade stands had some unexpected competition from McDonald’s (NYSE:MCD).

Although burgers and chicken dominate McDonald’s menu and did well overseas, it was the search for lemonade that brought in the U.S. customers and profits for McDonald’s during its second quarter ended June 30, 2011. The company said U.S. sales jumped 6.9% in June after the introduction of its frozen strawberry lemonade. The beverage, which sells under the McCafe banner, helped McCafe sales increase 29% during the quarter.

Introduced in May, frozen strawberry lemonade offered consumers looking to wet their whistle with a trendier summer drink, an icier version of the traditional beverage with a touch of strawberry. And the slush-like consistency allowed drinkers to sip on the drink a lot longer than they normally would a pure liquid version.

Restaurant chains and other fast-food vendors rely on their beverages to lift margins. But those profits have come under fire as specialty drinks stores such as Starbucks (NASDAQ:SBUX) lure away customers.

With its McCafe line of beverages, McDonald’s has been the most successful fast-food chain to replicate the high-margin beverage sales of Starbucks. McDonald’s said beverages account for about 20% of its store sales, and the McCafe drinks contribute as much as 80 percent of their price-to-profit, compared with about 60 percent from hamburgers.

Given the company’s success with its newest summer frozen treat, consumers can expect McDonald’s, Wendy’s (NYSE:WEN) and privately held Burger King to provide them with more quenching options next summer.

Which could signal the official end of the neighborhood lemonade stand.

Article printed from InvestorPlace Media,

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