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McDonald’s ratchets up U.S. coffee wars with expansion to grocery aisle

Joe Malabana, a swing manager at McDonalds's, makes coffee at his Toronto restaurant on Feb. 14, 2013. U.S. supermarkets will start carrying the fast food giant’s packaged coffee by 2015, McDonald’s said Aug. 19, 2014.

Jennifer Roberts/The Globe and Mail

McDonald's Corp. plans to start selling its packaged coffee at supermarkets nationally by early next year, a move intended to help raise the profile of the coffee sold at its U.S. restaurants.

The world's biggest hamburger chain has made a deal with Kraft Foods Group Inc. to manufacture and distribute the bags of McCafe ground and whole bean coffee, as well as single-cup pods that can be used in at-home coffee machines. Other chains, such as Starbucks Corp. and Dunkin' Donuts, already sell branded packaged coffee at retailers.

McDonald's, based in Oak Brook, Ill., has highlighted coffee as a key growth opportunity, with CEO Don Thompson saying it can be a way to get customers into its more than 14,000 U.S. restaurants. The chain has redesigned its coffee cups to have a more appealing look that people would want to carry around. And it's trying to make a bigger push into more profitable coffee drinks, such as flavoured lattes, rather than just drip coffee.

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Last year, for instance, it introduced a pumpkin spice latte. A similar drink at Starbucks has a loyal following.

At an investor conference late last year, a McDonald's executive noted the chain's coffee sales have surged 70 per cent since the introduction of McCafe specialty coffees in 2009.

McDonald's and Kraft Foods had said last year they were testing the packaged coffee in select markets.

Before Kraft split with Mondelez in late 2012, the packaged food maker had distributed Starbucks packaged coffee. But Starbucks broke off the relationship in 2010, saying Kraft failed to live up to its contract.

Kraft challenged the early termination of the deal, and an arbitrator last year ruled that Starbucks had to pay $4.76-billion (U.S.) to settle the dispute. That award goes to Mondelez International.

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