McDonald's Targets $100 Billion Beverage Market With Colorful Lineup

In December 2023, McDonald's Corp (NYSE:MCD) launched CosMc's, an alien-themed spinoff focused on coffee and snack pick-me-ups, featuring quirky drinks like the “French Toast Galaxy Latte” and “Pistachio Swirl Shaken Espresso.” The chain opened eight locations across Illinois and Texas, initially drawing long lines, before interest waned. By May 2024, McDonald's shut down the concept.

Once again, the fast-food giant is preparing to roll out a colorful new lineup of iced drinks, including Creamy Vanilla Cold Brews, Popping Tropic Refreshers, and sodas mixed with flavored syrups and dried fruit, known as "dirty sodas."

McDonald’s will begin testing these drinks at several U.S. locations in September. The company will reportedly introduce around 10 drinks in approximately 500 McDonald's restaurants, primarily located in Wisconsin and Colorado.

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The move is part of a wider trend among fast-food chains like Yum Brands Inc’s (NYSE:YUM) Taco Bell and Wendy's, which are boosting sales by offering more premium beverage options.

Charlie Newberger, who oversees McDonald's beverage and dessert offerings, told the Wall Street Journal that Gen Z is driving interest in fun and flavorful drinks. McDonald's wants to understand which drinks customers prefer and how they fit into its kitchen setup.

As inflation slows restaurant visits, drinks have become a strong growth area.

The company also plans to try out new drink flavors in other countries. According to Newberger, Europeans usually prefer lemon, orange, and mint flavors, while Americans tend to favor berry and citrus flavors.

Citing Technomic data, the WSJ reported sales at chains focused on beverages and snacks rose 9.6% in 2024 — the fastest growth among all restaurant types. While burgers still made more money overall, their growth was much smaller, at 1.4%.

"The purpose of CosMc's was for us to push the fringes," Newberger told WSJ. 

CosMc's customers didn't customize their drinks as much as expected, Newberger said. This makes it easier for McDonald's to test a simpler selection of toppings and syrups for future drinks.

Fast-food chains are now competing with coffee brands like Starbucks Corporation (NASDAQ:SBUX), Dunkin', and Dutch Bros Inc (NYSE:BROS).

McDonald's believes the drink market in the U.S., Canada, Australia, and parts of Europe could be worth $100 billion.

The company leaders say beverages are a hit with younger people and usually bring in higher restaurant profits.

The company reported a first-quarter revenue decline of 3.4% year-on-year to $5.96 billion, missing the analyst consensus estimate of $6.09 billion. Adjusted EPS of $2.67 beat the consensus estimate of $2.66.

Price Action: MCD stock is down 0.41% at $296.89 at the last check on Thursday.

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