McDonald's has devised a simple way to douse Taco Bell's high-profile breakfast roll-out: free coffee.
The fast-food giant on Friday surprised the industry -- and groggy morning commuters -- by announcing that its participating U.S. locations will offer freebie small cups of McCafe coffee during regular breakfast hours from March 31 through April 13.
At McDonald's, freebies are typically a last resort.
The iconic chain said this is the very first time it's ever had a free coffee "event."
McDonald's is still smarting from an in-your-face Taco Bell breakfast commercial that debuted this week, featuring several dozen real guys it found named 'Ronald McDonald,' who cheer the new Taco Bell breakfast line-up.
Unlike McDonald's conventional breakfast sandwiches, the Taco Bell offerings include oddball items Waffle Tacos and poppable Cinnabon Delights.
Breakfast is widely regarded as the last, best growth segment in fast food. It's a $50 billion business, estimates Technomic. McDonald's has cornered that breakfast market for decades with more than one-quarter of the fast-food breakfast business, but it's suddenly feeling new pressure from such unlikely breakfast competition as Taco Bell and Starbucks.
"This event is McDonald's way of encouraging new guests to try McCafe coffee," says Greg Watson, senior vice president of McDonald's U.S. menu innovation. McDonald's also wants to coax customers it already has into visiting a bit more often. The hope, of course, is that folks who stop in for a free coffee will also walk out with a bag of breakfast munchies.
For McDonald's, the problems go deeper than breakfast. CEO Don Thompson has said that the chain's new product pipeline needs to improve. And February sales at its stores open at least 13 months fell 0.3%, as its U.S. business slumped for the fourth consecutive month in the midst of ghastly winter weather.
Even with the new competition at breakfast, McDonald's is hardly expected to lose much ground there. "So far, no one has been able to compete with McDonald's at breakfast," says Ron Paul, president of Technomic. "Everyone is grabbing for a little bit of market share wherever they can get it."