Border skirmishes in the coffee aisle

Border skirmishes in the coffee aisle

As a sign of the ever more competitive environment in the food industry, the supermarket and fast food industries are increasingly border crossing in search of sales growth. 

A recent example, as reported in the Wall Street Journal (October 30, 2013):  McDonald’s teaming up with Kraft to test market McCafe packaged coffee in k-cups for retail grocery sales.

This new partnership involves a “the competitor of my competitor is my friend” dynamic.  A tough quickservice restaurant environment had earlier motivated Starbucks to enter a packaged coffee distribution partnership with Kraft, which ended with a bitter breakup now playing out in the courts.  The same tough quickservice restaurant environment partly motivated McDonald’s to develop McCafe to compete with Starbucks.  And the tough retail grocery environment is now motivating Kraft to seek new sales growth in the coffee aisle through the alliance with McDonald’s, to compensate for the loss of the border-crossing Starbucks partnership.