Fast Food News: McDonald's Launches New Tactic in Coffee War; Panera Is Investigated

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McDonald's Will Enter the Bagged Coffee Market

Yesterday, McDonalld's ( MCD ) announced it will begin selling its Premium Roast coffee in grocery stores as packaged ground coffee and beans. The rollout will begin next year and is the outcome of a partnership with Kraft Foods ( KRFT ).

Moving into the supermarket is the latest step that McDonald's is taking with its McCafe brand, which has become a more significant player in a coffee market dominated by Starbucks ( SBUX ) and Dunkin Donuts ( DNKN ). Though McCafe was first introduced in Melbourne, Australia, in 1993, the cafe within a fast food restaurant was not introduced stateside until 2001. Since then, McCafe has caught on, with over 1,300 stores worldwide.

A major element to the draw of McDonald's as a coffee company is price: You can get any size coffee for $1, and more involved drinks like mochas and cappuccinos are cheaper than the Starbucks versions. It is likely that the packaged McDonald's coffee sold in grocery stores will also be a cheaper alternative.

Tim Hortons Introduces New Dark Roast to Keep Up With Competition

In other coffee news, Canada's biggest fast food chain, Tim Hortons ( THI ) is experimenting with a new blend of coffee, Dark Roast, in the test market of London, Ontario. That may not sound like big news, but in its 49 years of business, the company has never introduced a new blend of coffee.

Said Dave McKay, Vice President of Beverages at Tim Hortons, "I wouldn't necessarily agree that the changing palate has forced this, [but] I think people are becoming much more educated in their coffee choices." That, and the competition is continuing to chip away at Tim Hortons' Canadian dominance. As of 2009, the company boasted a full 80% of coffee sales at quick-serve restaurants in Canada. Now, that figure is 77%. Though that's a relatively small decline, the company is obviously taking it seriously. In 2009, McDonald's held 6% of the market. Now, it has 11%.

"Their attempt to try and gain more traction, stop the attrition, and solidify where they stand is very important now. Because as McDonald's grows, if Tim Hortons' share of coffee keeps dropping, they will be in trouble," said Doug Fisher, the president of food service consulting firm FHG International.

Major Law Firm Investigating Panera

After the close of the markets on October 22, Panera (PNRA) released a disappointing Q3 earnings report that detailed less-than-expected sales growth. Investors were also told that the company had experienced "operation friction" in Q3, the result of long wait times for customers, bad equipment, and insufficient staffing. The stock tanked the next day, declining as much as $9.29, or 5.7%. Since then, the stock has nearly recovered to its pre-earnings report price.

Today, the major Orlando-based law firm Morgan & Morgan announced it will be investigating whether or not Panera and some of its officers violated any federal securities laws when they made that "operation friction" statement to investors; was the statement an attempt to manipulate the stock price?

The law firm, one of the nation's largest, specializes in securities fraud, as well was antitrust law, consumer protection, and product liability.

Judge Denies Sriracha Factory Shutdown Attempt

With a lawsuit filed on Monday, the city of Irwindale, California, tried to close a Huy Fong Foods factory citing complaints from local residents about a strong smell that was causing burning eyes, irritated throats, and headaches. The news caused a lot of hot sauce fans to shudder: Huy Hong Foods produces Sriracha hot chili sauce, and the Irwindale factory is the only place the product is made.

Yesterday, Judge Robert H. O'Brien of the Los Angeles County Superior Court denied the city's request. He told June Ailin, the attorney for the city, "You're asking for a very radical order on a 24-hour notice. You probably should have come in earlier."

The Superior Court ruling will allow the plant to finish processing all the peppers it needs to make next year's hot sauce supply. As it turns out, there is just over a week left in the pepper-harvesting period.

Last year the city contacted the company's founder and CEO David Tran to complain about the smell. Tran told city representatives that carbon filters were installed and that another layer of filtration was being installed. Moreover, air quality inspectors detected no smell 20 feet from the factory's exhaust system. In the factory's lobby, they noted a faint chili odor, rated a 1 on a scale to 10.

Despite yesterday's ruling, another hearing is set for November 22.

For more on Huy Fong Foods, Sriracha sauce, and David Tran, read this fascinating article from Quartz.

Follow me on Twitter: @JoshWolonick and @Minyanville



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: DNKN , KRFT , MCD , SBUX , THI

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