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Hey there, C-Store Family! Let’s talk about some news that dropped recently that has big implications for everyone in our industry. McDonald’s, the golden arches giant, announced they are planning to test an expanded beverage menu – featuring some exciting, customizable drinks inspired by their new small-format concept, CosMc’s – in existing restaurants this year. The initial beverage test in the U.S. will happen in some of their existing restaurants.

Now, you might think, “Okay, McDonald’s selling more drinks, so what?” But lean in, because this strategic move by Mickey D’s is a direct play for a piece of the pie that is absolutely crucial to the convenience store business: beverages.

Why the Big Sip Focus?

McDonald’s launched CosMc’s in 2024 as its first new restaurant concept in the U.S. in 60 years, focusing heavily on beverages like specialty lemonades, teas, blended drinks, and cold coffee, with customizable options like popping boba, flavor syrups, and energy/vitamin C shots. There are currently five CosMc’s locations open, mostly in Texas.

Speaking on a recent earnings call, McDonald’s CEO Chris Kempczinski highlighted that the company discovered “interesting learnings” through the CosMc’s rollout. These findings have given McDonald’s a better understanding of consumer customization preferences and interest in emerging beverage categories.

Crucially, Kempczinski stated that McDonald’s views beverages as a place where they expect “significant growth in the profit pool“ within the industry. He admitted that while McDonald’s holds about 10% of the coffee market share sector-wide, they believe they can “be doing more to capture our fair share of that.” They see opportunities in untapped areas like energy drinks, where the larger system doesn’t currently participate.

This plan is part of a broader strategy within McDonald’s new structure. It includes dedicated leaders for key categories like beverages. The goal is “better accountability and sharper line-of-sight into what it takes to win” in these verticals. This approach helps to compete against “specialists”.

How Does This Affect C-Stores?

We all know that coffee, fountain drinks, bottled beverages, and especially energy drinks are high-margin, high-traffic drivers for c-stores. People stop for gas, yes, but they also stop specifically for their morning coffee, their afternoon soda fix, or that energy boost. McDonald’s is explicitly looking to capture more of those stops, and here’s how their expanded drink menu directly affects us:

1. Intensified Competition in a Core Category

Let’s face it, McDonald’s is already a competitor for breakfast and quick meals. But traditionally, our deepest well of profitable transactions has been beverages. McDonald’s is now explicitly targeting this. They’ve seen the success of the CosMc’s concept, which focuses heavily on customizable and specialty drinks, and they’re bringing that firepower to their massive footprint of regular stores. Think about it: they have incredible brand recognition, drive-thrus designed for speed, and a marketing budget bigger than many small countries. By offering a broader, more appealing drink selection – beyond their standard McCafe and fountain options – they are positioning themselves as a direct alternative for that grab-and-go beverage run. This isn’t just added noise; it’s a major player doubling down on our bread and butter with a fresh, potentially exciting new menu.

2. Pressure to Innovate and Elevate Our Own Offerings

With McDonald’s stepping up their beverage game, sitting still isn’t an option for convenience stores. This move creates a “pressure cooker” environment for us to seriously evaluate and enhance our own beverage programs. We can’t just offer the same old thing and expect customers not to be tempted by the new kid on the block (even if that kid is a giant corporation). What does that look like? It means needing to innovate on several fronts:

• Quality: Is our coffee really good? Consistent? Hot (or perfectly iced)? Do we need better beans or brewing methods?
• Variety & Customization: Can customers easily customize their drinks? Do we offer interesting flavors, milk alternatives, or toppings? Do we have a wide enough range of cold beverages, including specialty iced coffees, lemonades, or energy drink variations? Can we offer unique, local, or limited-time options McDonald’s can’t easily replicate?
• Speed & Convenience: Can customers get in and out quickly, especially during peak times? Is the self-serve station clean, well-lit, and fully stocked? Is the flow intuitive?
• Value & Loyalty: Are we giving customers a compelling reason to choose us beyond just proximity? Loyalty programs specific to beverages (like buy-X-get-Y coffee clubs), combo deals, or subscription models can build habit and preference. McDonald’s scale allows them to potentially offer competitive pricing or splashy limited-time offers. We need to counter with compelling value based on our strengths.

3. Potential Erosion of Food Attachment Sales

This is a subtle but significant point. One of the beautiful things about the c-store model is “food attachment“. Someone comes in for a coffee or a fountain drink, and while they’re in the store, they grab a pastry, a snack bag, a candy bar, or even a quick sandwich. That beverage stop triggers additional, profitable impulse purchases. Interestingly, McDonald’s has learned from the CosMc’s test that beverage-focused customers are indeed likely to add food items to their order. By becoming a more attractive destination for just the drink, they increase the likelihood that the customer will buy their snack, breakfast sandwich, or afternoon treat there as well. This directly siphons off those valuable attached sales that contribute significantly to our average transaction value and overall profitability.

4. Shifting Traffic Patterns and Consumer Habits

At the end of the day, this is about where the customer decides to spend their dollar and their time. If McDonald’s successfully markets these new beverages and makes the experience appealing (whether through taste, price, novelty, or speed), they could fundamentally alter consumer routes and habits. Instead of automatically pulling into the corner c-store for their morning coffee or afternoon pick-me-up drink, customers might start heading to the McDonald’s drive-thru or counter. This shift, even if seemingly small for individual customers, can add up across a neighborhood or city, impacting overall traffic counts and sales volume for convenience stores, especially during key beverage dayparts.

5. The Digital Battleground: Apps, Loyalty, and Personalization

But the competition isn’t just physical; it’s increasingly digital too. In today’s world, the fight for the customer isn’t just happening at the counter or the drive-thru; it’s happening on their phone screen. McDonald’s has invested heavily in its mobile app, loyalty program (MyMcDonald’s Rewards), and personalized offers. You can bet they will integrate these new CosMc’s-inspired beverages seamlessly into this digital ecosystem. What does this mean for c-stores? It adds another critical layer to the competition. McDonald’s can now leverage its tech to offer:

• App-Exclusive Deals: Special pricing or offers on the new beverages only available via their app, driving app downloads and usage.
• Loyalty Boosts: Bonus points or rewards specifically for purchasing these new drinks, accelerating customer progress towards free items and building digital habit.
• Personalized Promotions: Using data to offer highly targeted deals based on a customer’s purchase history or location, making offers incredibly relevant and tempting.
• Mobile Order & Pay: Making it easier than ever for customers to order their custom drink ahead of time for quick pickup, enhancing the convenience factor that c-stores rely on. While many c-stores are developing or enhancing their own apps and loyalty programs, McDonald’s already has a massive, active user base. Their ability to tie exciting new products directly into a rewarding and convenient digital experience raises the bar for c-stores and adds pressure to accelerate our digital strategies to keep pace and maintain customer loyalty on this crucial front.

The Takeaway: Adapt, Innovate, and Own Your Strengths

In summary, McDonald’s expansion into a more aggressive beverage strategy, fueled by their CosMc’s learning and integrated with their powerful digital platform, is a clear competitive threat. It intensifies the battle for the customer’s beverage dollar on multiple fronts – product, price, convenience, location, and digital engagement. It puts significant pressure on convenience stores to innovate, protect their valuable food attachment sales, and risk seeing both physical traffic patterns and digital engagement shift.

But let’s not just see this as a threat; it’s also a catalyst. It forces us to sharpen our focus on what makes our beverage programs, our stores, and our customer experience unique and valuable. We often have inherent advantages like hyper-local convenience, potentially faster in-and-out times (if executed well), a wider overall selection of all types of drinks and complementary products, and that personal relationship with our regulars that a big chain can’t replicate.

The challenge is clear: leverage our strengths, innovate our offerings both in-store and digitally, ensure a consistently great customer experience, and remind customers why their local c-store is the best, most convenient, and most rewarding place for their perfect sip. This is the time to be proactive, not reactive.

I’d love to hear your thoughts.

Until next time!