September 16, 2014 / 4:35 PM / 3 years ago

Amid coffee rivalry, McDonald's Canada to sell java in grocery stores

McDonald's McCafe coffees are seen at its Harajuku-Omotesando shop in Tokyo in this April 29, 2012 file photo. REUTERS/Kim Kyung-Hoon/Files

TORONTO (Reuters) - McDonald’s Corp is making its McCafe ground coffee available in Canadian grocery stores this month, the fast-food giant said on Tuesday, part of its broader campaign to win market share in a country long dominated by rivals like Tim Hortons Inc and Starbucks Corp.

The competition to woo Canadian coffee drinkers has intensified in recent years, while rivals have pushed into McDonald’s territory by expanding their own breakfast and lunch menus in order to attract new customers and drive up spending per visit.

“Everybody’s trying to scramble for customers,” the chief executive of McDonald’s Canada, John Betts, told Reuters.

Tim Hortons, which claims to brew nearly eight out of every 10 cups of coffee sold in Canada, last month announced a new coffee blend, marking its introduction of a second blend after 50 years in business.

Betts says that since taking over operations in Canada in 2008, his focus has helped McDonald’s double its market share in coffee and triple its coffee sales. McDonald’s launched the McCafe brand in Canada in 2011.

“You might say it’s the thing that turned our business around here, in Canada,” said Betts.

“We’ve had double-digit growth on a compounded basis over the last five years at breakfast time, in terms of traffic and sales. That’s a significant category growth for us.”

Betts, who started as a part-time worker at McDonald’s 44 years ago, said in his six years in Canada, McDonald’s has grown its share of the coffee market while opening only a handful more restaurants, compared with the hundreds opened by competitors.

But with 78 percent of coffee drinking done at home, according to the Canadian Coffee Association, there’s a bigger market that McDonald’s wants to tap into.

McDonald’s Canada is partnering with Kraft Canada to sell its bagged medium roast ground coffee, as well the single-serve formats for Tassimo and Keurig in grocery stores.

The world’s largest fast-food chain began testing McCafe grocery sales in the United States last year and will launch nationwide in the United States in early 2015.

The push into grocery stores comes as sales at established restaurants at McDonald’s globally have declined. The company has been grappling with internal missteps, brutal competition and shifting consumer preferences.

But Betts said Canada is one of McDonald’s top-performing markets, and it is still seeing “significant positive momentum” in growth, though he declined to provide data.

In Canada, McDonald’s restaurants have had to address tougher government restrictions on bringing in temporary foreign workers following an outcry over perceived abuses of the system.

Betts said McDonald’s was working with franchisees to adapt to changes, though he said that there were labor challenges in parts of the country.

Editing by Jeffrey Hodgson and Leslie Adler

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