McDonald's Smoothie Launch Could Benefit Entire Category

NEW YORK -- McDonald's Corp. is setting out to jolt the smoothie market. The fast-food giant launched its smoothies nationwide yesterday, bringing a marketing machine that up until now has not been seen in the category, according to a report by Wall Street Journal.

McDonald's declined to disclose the budget behind the smoothies' launch, but marketing director Sofia Therios called it a "respectable investment" for the company.

The chain’s marketing plans for its smoothies include rounds of television advertisements that show dancers depicting the blending and pouring of the frozen fruit drinks. Also, starting July 22, participating McDonald's stores will hold three national sampling days, part of the reason the company recently told some stores to stop aggressive promotions like giveaways in recent weeks, so that the chain would have adequate supply.

McDonald's presence alone could boost the entire smoothie market, which was measured by research firm Mintel at $2.5 billion in 2007, the most recent year available. This could potentially prove a boost to smoothie players like Jamba Juice Inc., Starbucks Corp. and Panera Bread Co., the newspaper reported.

"Even though we aren't the first in the category, we are committed to grow the category," Therios said in an interview. "We're open to taking market share on the way."

Jamba Juice, with about 750 stores compared with McDonald's 14,000 in the U.S., is looking forward to McDonald's selling more smoothies, hoping that more consumers will get used to the idea of getting the drinks from restaurants.

"We view the entry of McDonald's into the smoothie category as an overall validation of the potential of smoothies," Jamba Juice Chairman and CEO James D. White said. "Their advertising will expand interest in the category."

White said Jamba Juice stores in areas where McDonald's tested the product haven't seen a significant impact in sales due to little customer overlap. Jamba Juice offers consumers a "trade-up" option to McDonald's smoothies with more ingredients like mangos and pomegranate juice, and more customizable options like vitamin or protein additions, according to the report.

McDonald's has said it will make its pitch on value, highlighting a $2.29 price for 12-ounce smoothies, which come in strawberry-banana and wild berry flavors. Jamba Juice's smoothies, meanwhile, start at $3.55 for a 16-ounce size.

"We think there's a significant consumer interest in affordable luxury," White said.

McDonald's addition of smoothies underscores the company’s growing use of beverages to boost sales in the U.S. McDonald's has said that adding its McCafé espresso-based drinks, frappes and now smoothies has put the company on track to exceed its initial goal of adding $125,000 in annual sales to the average U.S. store.