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TheStreet Open House

Don't Expect to See McDonald's Fries in Your Freezer Aisle

NEW YORK (TheStreet) - McDonald's (MCD) is planning to roll out packaged coffee next year at grocery stores across the U.S., but don't expect to see other Mickey D's goodies in the grocery aisle anytime soon.

McDonald's said on Tuesday that by partnering with Kraft (KRFT)   it plans to "expand the manufacture, marketing and distribution of the McDonald's McCafe brand in the U.S. by packaging its signature coffee for sale in grocery stores and other retailers nationwide." The coffee product will come in ground, whole bean and on-demand single cup McCafe coffees, beginning in early 2015, McDonald's said in a press release.

McDonald's strategy to add exposure at the retail aisle says "this a brand that can compete" with the likes of Starbucks (SBUX) and Dunkin Brands (DNKN) , said David Morris, senior analyst at Packaged Facts, a market research firm that focuses on food, beverage and consumer packaged goods categories.

Read More: Why Keurig Green Mountain (GMCR) Stock Is Soaring Today

"All coffeehouse brands are in [packaged] coffee at this point from Peet's to Caribou to Seattle's Best. McDonald's may see this as a natural progress [to] be taken seriously as a coffeehouse brand," Morris said.

In addition, with Kraft as a partner, "there is the opportunity for [McDonald's] to introduce other type of coffee type of beverages down the road," Morris said. However, any potential for frozen hamburgers or French fries is likely not being considered, he added. "Coffee is a far more natural segue into retail," he said. 

Retail sales of coffee in 2013 totaled approximately $10.6 billion, according to Packaged Goods.

Keurig Green Mountain (GMCR) said on Friday that it inked a multi-year deal with Kraft to manufacture and distribute Kraft coffees including the Maxwell House, Gevalia and Yuban brands, into K-cup formats. 

McDonald's roast and ground product will come in 12 oz. bags with flavors including Premium Roast, Breakfast Blend, French Roast, Colombian, and French Vanilla, among others. The single cups will come in three flavors: Premium Roast, French Roast and Premium Roast Decaf.

"We understand there is huge demand for at-home options and we've built great success with our McCafe coffee in restaurants. So, it was a natural next step to provide customers with McCafe coffee to enjoy in their own home," Greg Watson, senior vice president, McDonald's U.S. menu innovation, said in the release.

Coffee has been a bright spot in McDonald's restaurant sales, which have been struggling particularly in the U.S. Second-quarter comparable sales for the U.S. declined 1.5%, McDonald's said last month.

"To complement our emphasis on our core menu, we are sequencing new menu items and also our limited time offers in the four categories where we believe growth will outpace the overall industry. Those categories are premium beef, chicken, breakfast, a category where we are the industry leader and beverages particularly coffee and blended-ice drinks," McDonald's CEO Don Thompson said during an investor presentation at a Sanford Bernstein conference in May.

"We have and sell the most drip coffee in the U.S. We have to reintroduce customers to that. And I think that's very important so we focused on that this year in the U.S.," Thompson said.

McDonald's has apparently been testing the product in select markets this year, according to the Los Angeles Times.

"At this time, we do not have any plans to introduce any of our other menu items into the grocery stores," McDonald's spokeswoman Jessica Schulze wrote in an email to TheStreet on Friday.

Read More:
Will McDonald's (MCD) Stock Be Affected By Increased Russian Scrutiny?

-- Written by Laurie Kulikowski in New York.

Follow @LKulikowski

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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