On her first try, Florence Edelblute was not convinced McDonald's can do coffee and espresso as well as it does burgers and fries.

The San Leandro resident said she decided to try one of the flavored espresso-based drinks after receiving a coupon in the mail announcing the new offerings.

"I like good coffee," she said. Some of her favorite coffee roasters and shops include Peet's, Starbucks and Arizmendi, a bakery, in Oakland. "I had the coffee here and it just didn't match up to other coffee I've had."

Edelblute, like other critics who have trouble equating the fast-food giant and high-quality coffee, is the symbolic hurdle McDoanld's must clear to succeed in its attempt to merge the two main segments of the breakfast market: hot, fast service food and coffee.

The Bay Area is one of the first markets where McDonalds, the country's largest fast-food chain, has begun rolling out its new McCafe concept that includes espresso and specialty coffee beverages.

The chain expects to add this lineup to all of its 12,000 stores by next year.

"Our unique proposition is that we're offering excellent quality at a great price and more convenience," said Jason Goldblatt, who owns several McDonald's franchise stores in the East Bay. "People want coffee, but they also need to eat."

Breakfast, one of the fastest growing segments of the food and restaurant industry, is tough territory for retailers that want to please consumers looking for substantial food offerings and the morning caffiene jolt.


Advertisement

Quick service restaurants like McDonald's, Burger King and Wendy's offer quick and inexpensive hot items for breakfast. Coffee shops and chains like Starbucks and Peet's, on the hand, offer high quality coffee, but carry fewer food options.

On the sidelines, are chains like Emeryville-based Jamba Juice and Panera Bread Co. are also trying to corral morning customers. Jamba recently launched a breakfast menu featuring a new lineup of baked goods, yogurt and granola blends and thicker smoothie options. Panera has just premiered a line of breakfast sandwiches made with grilled Ciabatta bread.

"It's been interesting to watch this trend over the last 10 years," said Matthew Ramerman, principal of HL2, a Seattle-based advertising agency that focuses on restaurant chains. "Consumers have been saying 'I'm looking for a breakfast solution.'"

Thanks to products like the Egg McMuffin, Illinois-based McDonald's claims to "own breakfast" and the move into specialty coffee is an effort for the burgers and fries giant to take a bite of the coffee niche lead by Starbucks.

McDonald's breakfast options include a $1 menu that features yogurt and fruit parfaits, sandwiches and hashbrowns as well as breakfast platters that come with pancakes and scrambled eggs.

"It's hard to deny that McDonald's provides one of the very few on-the-go alternatives for breakfast," Ramerman said. "I don't know that there's been a serious competitor entering that space partly because no one's challenged them ... Coffee replaced breakfast for many people, but now consumers are looking for something more substantial."

McDonald's had introduced higher quality coffee blends a few years ago and began selling espresso-based drinks in January.

The drinks, made and served from a special espresso bar, include lattes (espresso and steamed milk) and cappuchinos (espresso, steamed milk and foam) available in flavors such as vanilla, caramel and mocha. The drinks can be served warm or iced.

So far, the beverages are available in at least seven Bay Area locations including three sites in the East Bay on 14th Street in San Leandro, Los Positas Road in Livermore and Pleasanton's Stoneridge Mall.

The other four are inside Wal-Mart stores in Mountain View, Salinas, San Jose and Gilroy. McDonalds expects all of its stores to offer the drinks by the end of the year.

Coffee experts credit Starbucks for making artisan-brewed coffees and espresso drinks an everyday product for the masses, but later got involved in other aspects of retail including merchandise, music and broader food selections. It introduced a breakfast sandwich in 2005 that it plans to discontinue this summer.

The company's chief executive, Howard Schultz, has recently vowed to bring Starbucks back to its original mission of serving great coffee.

"What Schultz is saying is that there's just no way to deliver quality fresh food at that many outlets," said Michaele Weissman, author of the forthcoming book, "God in a Cup: The Obsessive Quest for the Perfect Coffee."

"The freshness part is hard to pull off. ... The high-end coffee business is so unbelievably complicated and then to become a fast-food restaurant is unbearable. The logistics are so impossible."

Peet's offers artisan baked goods and that's it.

"In the case of Peet's, when you're exceptionally good at something, you want to be stay focused on what you do best and what customers appreciate and know you for," said Chris Lansing, Peet's chief marketing officer. "We offer breakfast items that will complement that experience, but not overwhelm the experience."

Weissman explained that for several decades after World War II, most Americans were used to drinking coffee that was poor on taste, but cheap to buy and easy to prepare at home. That changed with gourmet pioneers like Alfred Peet, who started Peet's Coffee and Tea, and the global expansion of Starbucks Coffee.

"What the whole speciality industry is trying to do is to train and educate consumers in what good coffee tastes like," Weissman said.

Now, many coffee roasters and companies like McDonald's are trying to capitalize on the growing interest in specialty coffee.

"McDonald's sees that the growth is in the high-end," Weissman said. "There is an aspirational aspect. There are people who will go into McDonald's, buy the product and feel like they are stepping up to the next level."

The other part is that equation is whether coffee lovers will love McDonald's coffee.

Weissman said McDonald's push to brand itself as a specialty coffee shop will not easily win over consumers or critics.

The Specialty Coffee Association of America, a trade-group based in Long Beach, says that specialty coffees "is defined as a coffee that has no defects and has a distinctive flavor in the cup."

Sales of specialty coffee reached $12.3 billion in 2006, the most recent data available, which represents a 48 percent increase compared with $8.3 billion in 2001.

Factors that influence whether coffee can be considered specialty is the region where the beans were grown, how the beans were roasted and how the coffee was prepared for drinking.

In Northern California, McDonald's coffee supplier is Los Angeles-based Gavina Gourmet Coffee, a family owned-company that has been in business for more than 130 years.

Even if McDonald's does cultivate a new crop of coffee drinkers or pulls some business from the coffee chains, the additional competition could benefit the industry as a whole.

"Customers who truly love coffee will eventually gravitate to Peet's," Lansing said. "From the very beginning, Peet's has always been about sharing, growing and developing this category."

Blanca Torres covers retail and consumer issues. Reach Torres at (925) 943-8263 or at btorres@bayareanewsgroup.com. Read her blog, Shop Talk, at www.ibabuzz.com/shoptalk/.