McDonald's China intensifies coffee business

Author | Liu Baodan

Editor | Zhou Zhiyu

Compared to popular coffee brands like Luckin, Starbucks, and Kudi, McCafé under McDonald's is relatively low-key. Now, with McDonald's launching new products, McCafé is set to make a splash.

On February 5th, McCafé announced that its original freshly brewed coffee has been fully upgraded to freshly extracted coffee, covering approximately 7,000 McDonald's restaurants nationwide. Compared to freshly brewed coffee, freshly extracted coffee has a richer aroma and taste, without the bitterness and sourness.

After this upgrade, consumers can enjoy a better coffee experience at McCafé for the same price as freshly brewed coffee, and they can still enjoy free refills in the restaurant, further highlighting the cost-performance advantage.

He Yabin, Chief Growth Officer of McDonald's China, stated that consumers can taste freshly extracted coffee, and the freshly ground coffee, including the milk tea series, will continue to be offered, allowing consumers to choose coffee drinks and meal combinations based on their scenarios and needs.

According to insiders at McDonald's, freshly extracted coffee is not only a supplement to the McCafé product line but will also further enhance the quality of McDonald's breakfast. Starting from February 4th, consumers can obtain free drink redemption vouchers through the official McDonald's App, mini-programs, and other channels.

As a globally recognized food service brand, McDonald's officially entered the mainland China market in 1990. In 2017, McDonald's China entered the "Golden Arches Era," accelerating development in a more localized manner, deepening the local supply chain system, and promoting comprehensive digital transformation, setting a goal of 10,000 restaurants. As of December 2024, there are over 6,800 McDonald's restaurants in mainland China.

Although McDonald's introduced coffee as early as 2007, its coffee business only began to gain momentum in recent years. In 2020, McCafé announced an investment of 2.5 billion yuan over the next three years to accelerate its layout in the mainland coffee market. As of August 2022, the number of McCafé stores in mainland China was nearly 2,500. According to plan, McCafé will add about 1,000 new stores in 2023.

From a market scale perspective, coffee has enough potential to become McDonald's China's second growth curve. According to the "2024 China Urban Development Report," China's coffee market is rapidly developing, and it is expected to exceed 300 billion yuan by the end of 2024; the per capita annual coffee consumption has increased from 9 cups in 2016 to 16.74 cups in 2023.

McDonald's advantage in boosting coffee lies in its store and supply chain advantages. The dining scene of McDonald's is naturally compatible with coffee, which can create a synergistic effect, not only rapidly expanding the coffee market scale but also attracting new customers to McDonald's.

However, challenges should not be underestimated. In recent years, competition in China's coffee market has become increasingly fierce, with even international coffee giants like Starbucks caught off guard by Luckin, Kudi, and new tea brands like Mixue Ice City and Gu Ming also accelerating their layout in the coffee market.

Taking Starbucks as an example, as of the end of the fiscal quarter in September 2024, Starbucks China achieved revenue of $783.7 million, a year-on-year decrease of 7%, with same-store sales declining by 14% year-on-year. Consequently, Starbucks China has entered a challenging period of leadership iteration and the introduction of local partners Ultimately, market competition must return to products, prices, and services. From a positioning perspective, McCafé mainly sits between Luckin Coffee and Starbucks, primarily adopting a big product strategy, focusing on "classic + simplified," with milk coffee products as the main offerings.

In recent years, the coffee industry has been in a continuous price war, with low prices becoming a key factor in expanding the market. Behind the launch of freshly brewed coffee, McCafé has begun to highlight its cost-performance advantage. In fact, this aligns with McDonald's strategic tone; at the end of last year, McDonald's announced at the "Fan Conference" that it would increase value-for-money promotions by 2025.

In December last year, McDonald's announced a reduction in delivery fees, adjusting the delivery fee for McDelivery from 9 yuan to 6 yuan. McDonald's China CEO Zhang Jiayin defined 2024 as a year of "resetting consumer habits." She emphasized that consumers take pride in pursuing high cost-performance products. "This applies to both the elite class and ordinary consumers."

At the beginning of 2025, McDonald's eagerly launched new products, firing the first shot in the coffee market for the new year. However, for the company to gain a share in the fierce market competition, it needs to come up with more strong measures.

After more than 30 years of development, McDonald's is once again entering a prime period