If you live in the US and you haven’t seen the latest McDonald’s Iced Coffee commercials on TV, its possible it hasn’t hit your market yet. Here in Southern California, a marketing campaign blitz is underway. See Premium Roast Iced Coffee at a Southern California McDonald’s …

If you’ve managed to miss the McDonald’s ad, have a look …

To be honest, McDonald’s is probably the last place I’m inclined to go for coffee, but I have to tell you, this marketing campaign strikes me as brilliant.

As part of a broader initiative to go further up-scale with gourmet coffee, McDonald’s introduced the McCafe stores over four years ago in the Australian market.

In the US market, McDonald’s began testing premium coffee and espresso-based drinks in approximately 800 stores over a year ago and has plans to expand the premium coffee products to nearly 14,000 US based stores across the country.

While the push to compete in the premium coffee market may seem like an inappropriate fit for McDonald’s, offering iced coffee is a no-brainer. According to the National Coffee Association, over 41 million Americans switch to iced coffee during the warmer months of the year. And for those who would prefer the more appealing ambiance of a Starbucks store over a McDonald’s, an iced coffee is more often a hit-and-run order-on-the-go purchase.

Which brings me to these latest iced coffee commercials on TV. Perfectly executed, in my opinion. Short and sweet, the ads capture the precise essence and appeal of the new iced coffee offering.

It’s only a 30 second spot, but notice a few clever techniques. The only branding is the logo on the cup, and the brief splash at the very end. There’s no shot or view of the inside or outside of the store, the line of customers, or the standard McDonald’s food counter. Just a refreshing iced coffee, on the go, from the frame of reference of the customer holding the iced coffee in her hand as she’s walking along the sidewalk, taking in the spring/summer scenery outdoors.

The music also strikes me as equally clever. A cheerful, appealing Latin sounding theme, sung by a female vocalist with a cool, sultry pleasing sound, and no one seems able to understand the lyrics. Clearly not English, maybe Portuguese, a-la some Brazilian samba music style, but it’s immediately catchy and deliberately drives the buzz marketing with people clamoring to decipher the words she’s singing.

The whole thing is appealing enough, without getting on your nerves, to sustain the relentless barrage of coverage underway. Not exactly the television version of the 2-second iced-coffee nano-ads (see Michael Stelzner’s blog) that popped up over the radio last year. These recent McDonald’s TV commercials are short bursts, delivered over and over again, sometimes twice within one or two minutes of each other. I haven’t timed the different versions with a stop-watch, but I’m pretty sure I’ve seen some short 10-15 second versions, almost a sound-byte, playing 5 or 6 times within a 15 minute time frame. But they don’t seem to get on your nerves.

So, now I’m curious, and I’ll have to visit a McDonald’s soon to try one of the new iced coffees. From what I’m hearing, the feedback has been generally positive. People are saying the iced coffee drinks at McDonald’s are pretty good!

And the price is right. Looks like McDonald’s Iced Coffee may give Starbucks a run for the money. Available in five flavors, Hazelnut, Vanilla, Caramel, Sugar-Free Vanilla and Regular. As the ad says, “a large cup of cool, creamy bliss for just $1.79″ ….

And, if someone can translate the lyrics in the commercial, by all means, post a comment and solve the mystery … buh, duh, buh, buh, bao

It’s a constant lament, almost a monotonous drone, actually. How often do we hear that “Starbucks competition is going to drive all the independent coffee houses out of business”?

I also continue to hear lots of complaining about Starbucks quality lately. Mediocre coffee, uninspiring espresso shots coming off the automatic push-button Verismo machines, baristas that could use more training, breakfast sandwiches that overpower the smell of fresh coffee in the stores, over-roasted coffee beans, coffee drinks are too expensive, and the list goes on ….

Even if some of this Starbucks criticism is a little overdone, something doesn’t add up here. How is it possible that Starbucks has become the target of so much criticism, yet local coffee houses have no chance or prayer to compete. Honestly, you can’t have it both ways.

There is no question that Starbucks has been influential in creating and expanding a more sophisticated coffee culture in the United States. The millions of customers that grab a daily coffee fix from Starbucks comprise a market that simply didn’t exist thirty years ago. And as a result of this expansive market, consumer demand for specialty coffee drives significant business to the many independent coffee houses as well.

Starbucks may have started out years ago delivering a more authentic gourmet coffee experience, but with 15,000 stores globally today, they have, deliberately by design, become more of a fast-food operation than a specialty coffee chain. By necessity, many of the characteristics required for Starbucks to run a large, scaled up retail operation simply no longer align with the hand-crafted artisan coffee vision.

There will always be instances where a local coffee house may not survive as the larger coffee chains like Starbucks seem to inundate an area. And when it happens to one of your favorite coffee hang outs, it can be particularly painful. A store may not survive due to specific customer demographics and preferences in the area. And the possibility exists that an independent coffee house is not able to effectively differentiate itself from the competition and bring the customers through the door.

The hard reality remains, if you want to successfully compete, you have to work hard to provide a better product, offer a better service, provide a more appealing store, or offer some compelling reason for customers to come in to your establishment.

Let’s be honest. Not all local independent coffee houses are great. Most definitely, I’ve been in independent stores that define great specialty coffee in every way. I’ve also experienced my share of coffee houses that truly did not serve a good product and I would never return.

If an independent coffee house is willing to apply a little creativity, there are many opportunities to compete against Starbucks. Here are just a few ideas …

• Hire a trained and skillful barista with real passion for producing sublime shots of espresso.
• Outfit the store with a decent espresso machine, not hard to beat Starbucks on this one.
• Hold a barista contest once a month in the local area. This is great fun for the customers. You may even find a few Starbucks baristas in attendance.
• Offer a higher quality and more interesting variety of coffee beans than Starbucks.
• Hold coffee tasting classes in the evening once a week. Educate your customers to appreciate the varieties and options for fine specialty coffee from around the world. Come on, this is fun stuff to share your passion for great coffee with your customers. And you’ll be surprised how many customers are interested in learning more about it.
• Do some product demos on the weekend. Espresso machines, burr grinders, coffee presses …. you might sell some extra coffee equipment.
• Advertise and market your local coffee house brand. Why are you different and why should your customers care? Come on, every business has to get the word out. Customers don’t fall into your store by accident (well, OK, once in a while they do).
• Hold your employees accountable and make sure they are delivering excellent service.
• Train your employees if you expect them to deliver a superior coffee product.
• Offer some coffee products and coffee drinks that Starbucks doesn’t offer. Can’t think of anything? Really? Maybe that’s part of the problem. And when you do come up with something different, be sure to get the word out.
• Here’s the least creative idea, but its probably not too difficult to compete on drink prices with Starbucks.

Bottom line, competition is good. Where there’s competition, there’s a market, and it keeps businesses on their toes, and forces companies improve their products and to pay attention to their customers.  Starbucks has expanded their retail business from about 2500 stores in 2000 to over 15,000 today, and still growing. And along with the business expansion that Starbucks has been driving, the fact of the matter is that there are more independent coffee houses in operation today than ever. The tide rises all boats.

Starbucks does create opportunity for independent coffee houses to compete because Starbucks, with their scaled up massive formula driven operation today, is not that hard to beat.

The future looks bright for independent coffee houses. Here’s a good example of what I’m talking about. Let me share a story about one of my favorite independents.

Polly’s Gourmet Coffee in Long Beach, California has been a local tradition in the Belmont Shore area on second street for almost forty years. The store is about an hour and half ride from where we are in Southern California. Not exactly in our local neighborhood, but when ever I’m down in the Long Beach area, I make it a point to stop in for a visit.

Polly’s is the coffee passion of owner Mike Sheldrake. Mike is a bonafide coffee expert and among his many talents, he definitely knows coffee beans, and he’s a wonderful specialty coffee roaster. Polly’s fires up the roaster almost every day, so the place smells heavenly. In fact, real estate agents selling houses in the vicinity claim that the tantalizing coffee aromas emanating from Polly’s has helped them close a deal or two. At Polly’s, you can always count on the freshest roast coffee and find out about the best beans they’ve been roasting that week.

In the late ’90s, Starbucks showed up with their first Belmont Shores store, and then within another year or so, opened a second store in the area. Sheldrake was positive this spelled the demise for Polly’s Gourmet Coffee. No question, it was a wake-up call.

Initially, after the arrival of Starbucks nearby, business fell off 15% or more for Polly’s, which is disastrous for a small single store operation. But Sheldrake took stock, and with the advice of a local customer and business advisor, tightened up his business and figured out how to compete effectively. Today, business is better than ever. And Mike Sheldrake will tell you he’s glad Starbucks has come to Second Street.

Read an account of this triumphant story of competition between Polly’s Gourmet Coffee and Starbucks, published over nine years ago in 1999.