McDonald’s unveils US CosMc's trial and global expansion

McDonald's has announced the details of its new retro-style restaurant idea, CosMc's, which would operate in the same market segment as Starbucks.

Its pilot, focusing on hot and cold speciality drinks, will open this month near Chicago, and it aims to be in 10 locations by the end of 2024.

Meanwhile, the fast food giant plans to open about 10,000 McDonald's sites globally by 2027, with many in China.

The expansion would boost the number of its stores to about 50,000.

The first CosMc's is due to open in Bolingbrook, Illinois, near the fast food giant's headquarters, later this week, with about 10 more to open in Texas next year.

The concept is the fast food chain's latest effort to crack the lucrative coffee market, especially in the US, where more than 60% of the country drinks at least one cup a day.

"It's a very important category that McDonald's is not capitalising on properly in the US," said Jeffrey Young, founder of Allegra World Coffee Portal, a coffee research consultancy. "The question is, is this a credible approach?"

'Otherworldly' experiment

The name for the new brand comes from a McDonaldland mascot, an alien from outer space that craves its food, which appeared in adverts in the late 1980s and early 1990s.

The menu appears aimed at people with a very sweet tooth, offering items such as Churro Frappe - a kind of Spanish doughnut - and S'Mores Cold Brew - s'mores are biscuits, chocolate and marshmallows.

The company also promises customers the chance to make "otherworldly" drinks creations, customising their beverages with popping boba bubbles, or flavoured syrups.

There will also be a small number of McDonald's staple food items on the menu such as Egg McMuffins.

Sara Senatore, a senior analyst at Bank of America, said it was unclear why McDonald's thought it made more sense to launch a separate brand, instead of just expanding the menu at its existing shops.

"Maybe you bring in new customers who might not otherwise consider McDonald's. On the other hand, it's hard to establish a new brand," she said.

McDonald's already has a coffee and snack chain called McCafe, which only serves coffee and sweets, cakes or pastries.

It has had its greatest success outside of the US, ranking as Australia's top-selling brew. It is also the number two coffee seller in the UK, behind Costa, Mr Young said.

In America, however, Mr Young said McDonald's had struggled to establish its "coffee credentials".

A 2008 plan to bring baristas and espresso machines to its US restaurants never fully caught on. Another push about a decade ago has also had mixed results.

Ms Senatore said the surging popularity of drive-through takeaway coffee shops may have convinced McDonald's - an expert in drive-throughs - to try again.

The play also comes as rising prices have drawn shoppers to cheaper fast food options such as McDonald's for a treat, while legions of social media users on apps like TikTok have jumped on the trend of posting their own unique drink combinations created at coffee shops using different creams, sprinkles, syrups and more.

McDonald's boss Chris Kempczinski emphasised that investors shouldn't get too excited about CosMc's but did say it could go global.

"It's not worth our time to develop an idea that will only work in one market," he said.

Coffee shops are surging in popularity in China, a country that is key to the company's growth plans.

Its latest expansion includes 900 new restaurants in the US, 1,900 in international markets where it operates its own restaurants, and 7,000 in its international licensed markets.

The fast food giant said it could be the "fastest ever" period of growth for its burger business.

More than half of the 7,000 additions will be in China, which is the chain's second-largest market. It recently struck a deal to have greater control over its business in the region.

Mr Kempczinski has said China could eventually become McDonald's largest market.

But the company also said it was seeing an impact of the ongoing conflict in the Middle East.

Earlier this year, a BBC investigation uncovered allegations by McDonald's staff of a toxic culture of sexual assault, harassment, racism and bullying at its UK restaurants.

The BBC was told that workers, some as young as 17, were being groped and harassed almost routinely.

In response, McDonald's said it had "fallen short" and it "deeply apologised".

Last month, the UK boss of McDonald's told MPs the fast-food chain was receiving one or two sexual harassment claims a week following the investigation.