McDonald's to Test Upscale Coffees This Summer

McDonald's Corp. (MCD) will start testing espresso drinks at some of its U.S. hamburger restaurants this summer, the head of its North American business said on Friday.

McDonald's is also introducing other stronger coffee blends in the restaurants as it tries to keep up with more sophisticated U.S. consumer tastes.

Plans for the test marketing of espresso were revealed by McDonald's North America President Ralph Alvarez in an interview with Reuters. Espresso drinks are also being tested in Germany and Australia, he said.

McDonald's already sells espresso drinks at its McCafe (search) specialty coffee shops, of which there are 500 worldwide, including a handful in the United States.

But coffeemaking technology is just reaching the point where the company can test the drinks in some of McDonald's more than 30,000 hamburger restaurants, where customers expect to be served quicker, he said.

"We're going to find out if we can deliver the quality and the variety at the speed of McDonald's so that the person behind that order who just wanted an Egg McMuffin and a cup of coffee will not be slowed down," Alvarez said.

McDonald's, which gets 25 percent of its U.S. business from breakfast, is facing ever-growing competition in that space. Starbucks Corp., which helped introduce a generation of Americans to espresso and other fancy coffee drinks, now serves breakfast sandwiches in Seattle and Washington, D.C.

Wendy's International Inc. (WEN) also has said it plans to test expanding into the breakfast market at some point, while Burger King (search) is advertising a new omelet sandwich.

Alvarez's comments came as the chain celebrated the 50th anniversary of its first restaurant with the opening of a new two-story outlet in Chicago's River North neighborhood, complete with 60-foot Golden Arches, the company's trademark.

The first restaurant operated by founder Ray Kroc opened on April 15, 1955 in Des Plaines, a northwest suburb of Chicago, and did $366 in sales that day.

Its new Chicago flagship restaurant will do that much business in five minutes, McDonald's said.

Now the world's largest restaurant company, McDonald's has more than 30,000 restaurants in 119 countries. The company had $19.07 billion in sales in 2004.

Products like new coffee drinks, salads and a line of chicken sandwiches that will be introduced late this summer are items McDonald's is hoping will continue a run of strong sales growth in the United States.

Some analysts have questioned whether the company, which reported a 6.8 percent increase in sales at stores open at least a year in both the United States and globally, can continue to post such large monthly sales increases.

Aside from improving food and service, the company is keeping more restaurants open 24 hours and expanding capacity at some. The Chicago flagship, for example, has two drive-thru lanes to accommodate increased traffic.

"There's a lot more business for McDonald's," Don Thompson, chief operating officer of McDonald's USA said when asked if the company could maintain its pace of sales growth.

Despite its overwhelming turnaround in the United States, McDonald's business in Europe is more choppy, due in part to economic weakness in Germany. McDonald's has taken a number of initiatives in Europe, including introducing a value menu as well as premium offerings like salads.

Same-store sales in Europe, McDonald's No. 2 market, were better-than-expected in March after falling short of estimates in February. Investors have been eager for signs of stability in Europe as analysts have said sales volatility has held back the company's share price.

Jim Skinner, (search) McDonald's new CEO, said on Friday the company is on the right track in Europe.

McDonald's shares closed down 46 cents a share, or 1.5 percent, at $30.30 Friday on the New York Stock Exchange (search).