Dive Brief:

• Coca-Cola and McDonald’s have partnered to introduce a line of ready-to-drink McCafe Frappes in grocery stores in early 2018, the restaurant giant said in a statement. The beverages will be available in three flavors: caramel, vanilla and mocha.
• McDonald's bottled drinks will join the whole bean, ground and single-serve coffee currently available nationally in retail stores.
• The expanded retail presence is part of McDonald's broader McCafe platform relaunch, which includes a refreshed look, new logo and packaging and new espresso beverages in its restaurants. 

Dive Insight:

The lines of demarcation between retail and restaurant continue to blur. This time it is McDonald’s shifting further into retail by teaming with Coca-Cola to add shelf-stable, ready-to-drink McCafe Frappe beverages inside stores. With the restaurant giant already selling its McCafe packaged whole bean and ground coffee at retailers, this move is a logical next step. It also helps McDonald’s keep pace with the likes of Starbucks and Dunkin’ Donuts who have been busy penetrating grocery shelves with ready-to-drink options.

McDonald's “all-day breakfast” strategy has been a hit, so it only makes sense to extend the brand. While Starbucks or Dunkin’ may be better known for their coffee, McDonald’s has a loyal following of its own, particularly among older generations of seniors and boomers who grew up alongside the fast food chain. 

McDonald’s also has been working hard to encourage younger customers to frequent its restaurants with enhanced digital capabilities, including enticing mobile app offers and an ApplePay option. Cold RTD Frappes — likely at a lower price point than Starbucks drinks — could hold some appeal to a generation that grew up on Frappuccinos and other cold coffee beverages.

Coca-Cola stands to benefit from the deal as well. The beverage giant will be gaining some much-needed representation in the cold brew coffee aisle. Compared with its competitors, it was late to the game, launching its first cold brew coffee product and tea lattes under its billion-dollar RTD tea brand Gold Peak late last year.

Starbucks had already partnered with PepsiCo to handle RTD grocery store-facing versions of its popular cold brew coffee beverage, while Dr Pepper Snapple has established a distribution deal with RTD cold brew coffee maker High Brew Coffee. By working with a high-impact brand like McDonald's, Coca-Cola should make up for lost time.

Cold brew coffee's estimated category sales growth was 339% from 2010 to 2015, including 115% from 2014 to 2015, according to market research firm Mintel. In the twelve months ended in February 2017, researcher StudyLogic reported sales of cold brew in the U.S. were up about 80% from the prior year.

Cold brew coffee aligns with the consumer's demand for functionality and cold, convenient RTD beverages. Recent research surrounding coffee’s health benefits doesn’t hurt either. In an attempt to diversify their portfolios and sustain top-line growth as soda sales decline, beverage companies are jumping all over the cold brew coffee and tea trend. Now it looks to be a shoot-out in the race to establish dominance as the category king.