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McDonald's Unveils New Cold Drinks

DETROIT -- Buoyed by its new ice frappes business, McDonald's is expanding its cold beverage business to include smoothies.

The iced frappes business, which debuted in March, is being credited, in part, with the fast feeders' 3.8 percent same-store sales boost in April, according to report by USA Today. Now, smoothies are on tap.

Expanding the beverage line into pricier drinks is seen as a way to boost average sales and attract customers in for snacks during less-busy parts of the day, according to the report.

While some predict the move is bound to fail, other industry watchers recognize the segment's growth potential. "How big is big?" asked Karen Wells, vice president of U.S. strategy & menu at McDonald's. "It's really big when you have $153 billion out there for the taking," she told the newspaper, referencing the sum Americans spent on non-alcoholic beverages last year. "The sky is the limit."

The chain plans a huge marketing campaign for the frappes and upcoming smoothies in July.

Morgan Stanley analyst John Glass told the newspaper the new beverage strategy "is the biggest thing McDonald's has done since it rolled out breakfast.

Once smoothie and frappe sales are rolling, McDonald's annual specialty beverage sales could hit $2 billion, making it the No. 1 specialty beverage retailer in the country, behind Dunkin' Donuts and Starbucks.

McDonald's projects those incremental sales at closer to $1.5 billion, or $125,000 per store, the newspaper reported.

At Deborah Virgiles' two McDonald's restaurants in Detroit, customers can sample smoothies in the store or at the drive-thru order box. Cashiers tell customers who are ordering value meals they can substitute a smoothie for their soft drink for an additional $1.29. When stores sell more than 350 smoothies or frappes in one day, the staff receives food coupons. Since the drinks rolled out in March, her stores are selling 1,400 weekly.

"I want to make sure no customer walks out of here without a beverage," she told the newspaper.

The company makes about $1 profit on each smoothie sold, according to the report.

However, at $2.29 for a small smoothie or frappé and $2.79 for a Hot Mocha, the beverages are on the pricier side of McDonald's menu.

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