Coffee Wars

The Lempert Report
July 01, 2014

Is McDonalds getting some competition in the coffee world?

Subway has now partnered with Keurig Green Mountain to bring single serves brewers to thousands of North American locations. 

Subway had been quietly test driving the coffee by rolling out Keurig in over half of it's stores in the US. But now the deal is official,  Keurig's K150 Commercial Brewing System is in even more of the chain's North American locations. The K150 is a relatively small machine that takes up about as much counter space as a small microwave, and for Subway owners the best part is that for franchise owners it doesn't cost that much to purchase. 

So is Subway making a morning push? No word yet form the Sandwich maker on breakfast, but coffee does give Subway an all day offering which could bump up sales during slow times.  

McDonalds made efforts to elevate their coffee offering a while back by launching McCafe,  and while it's done ok, it  has failed to take share from Starbucks in espresso drinks. But now Subway may very well cut into the McCafe business. Coffee from a Keurig at a Subway may not be quite as good as the espresso machines at McCafe, but the differences probably wouldn't be dramatic.  If someone just wants coffee and is willing to buy it from a fast food chain, it seems most likely that customers will go to whichever store is most convenient for them. 

Subway’s beverage manager, David Zambory, said “We’ve heard overwhelmingly positive feedback about Keurig’s ability to deliver variety, quality and freshness on demand,” - looks like the coffee world just got a little bit bigger.