McDonald’s Wins U.S. Share with Coffee

McDonald’s Corp. has accelerated its U.S. market share growth by selling new products and promoting old standbys through the recession, even as consumers eat out less, said Chief Financial Officer Peter Bensen.

The new coffee products account for the largest increase in business outshining Starbucks in sales and quality

“It’s a constant struggle to balance new products that will create excitement with our existing menu items,” Bensen, 47, said in an Aug. 19 interview. “The eating-out market is shrinking in the recession and we’re grabbing an even bigger part of the market.”

The world’s largest restaurant chain introduced iced coffees and a larger $3.99 Angus beef burger, and advertised its Big Macs to win sales. McDonald’s accounted for 46.8 percent of the U.S. hamburger market last year, up 10 basis points from 2007, according to food-industry researcher Technomic Inc. Burger King Holdings Inc. was second with 14.2 percent.

“No one in the restaurant industry can introduce and promote new products the way McDonald’s can,” said Steve West, an analyst with Stifel Nicolaus & Co. in St. Louis. “They’ve been taking market share for so long, they could give some back,” he said, adding he doesn’t expect any reversal until 2010.

West is among the 12 analysts who recommend buying the stock, according to Bloomberg data. Nine recommend holding the shares and none advises selling them.

McDonald’s, based in Oak Brook, Illinois, rose 20 cents to $55.57 at 4 p.m. in New York Stock Exchange composite trading. The shares have lost 11 percent this year.

Rising Share

The company has raised its share of the U.S. fast-food market by 20 basis points in 2007, 30 basis points last year and 50 basis points this year through May, said Heidi Barker, a McDonald’s spokeswoman. She declined to provide more detailed figures or to comment on Technomic’s data.

Burger King added 30 basis point last year, while the Wendy’s chain lost 10 basis points for a 12.6 percent market share, according to Chicago-based Technomic.

Miami-based Burger King uses NPD Group’s Crest data, which estimates its 2008 market share rose to 14.5 percent from 14.3 percent, said Michelle Miguelez, a Burger King spokeswoman. Wendy’s representatives didn’t return calls seeking comment.

Eighty percent of sales at McDonald’s 14,000 U.S. stores come from the chain’s main fare, and advertising campaigns in the past year promoting the Big Mac, Quarterpounder and Chicken McNuggets have lifted sales across the menu, Bensen said.

‘Huge Increase’

“We saw huge increases in Big Mac sales” after national commercials aired last year, he said. “We’ve got a lot of brand equity in the core menu items and in these times that’s really resonating with our consumers.”

McDonald’s spent $822.7 million on U.S. ad campaigns last year, about $5 million more than in 2007, according to data from market-research firm TNS Media Intelligence. It spent $184.5 million in the first quarter, New York-based TNS said.

The hamburger seller also introduced lattes, going after coffee chains such as Seattle-based Starbucks Corp.

McDonald’s sales at U.S. stores open at least 13 months gained 3.5 percent in the second quarter, the only growth among the largest fast-food chains. Burger King’s same-store sales fell 3.2 percent in the U.S. and Canada in the same period, and Wendy’s fell 0.4 percent in North America. Starbucks’s U.S. sales declined 6 percent.