CosMc’s versus Starbucks: Who will win the specialty beverage war?

McDonald’s opened the first location of its spinoff brand CosMc’s this month. The fast-food giant is looking to capture some of the $100-billion-and-growing customized coffee drinks market. This will put it in direct competition with the likes of Dutch Bros and Starbucks, which is the biggest player.

However, an analysis by equity research firm William Blair doesn’t see the upstart brand posing an immediate threat to the coffeehouse powerhouse and its smaller competitor.

CosMc’s versus Starbucks: Who will win the specialty beverage war?

Analyst Sharon Zackfia at William Blair noted in her research note that CosMc’s is lacking on a handful of fronts and at present its threat to either Dutch Bros or Starbucks is “relatively muted.”

While McDonald’s has over 13,500 locations in the United States, the burger chain has decided to make its CosMc’s brand a standalone operation. This is because making specialized drinks is time consuming and would affect the efficiency at McDonald’s restaurants.

The company will start with 10 pilot locations. Besides the initial CosMc’s in Bolingbrook outside of Chicago, it will open nine more in the Dallas-Fort Worth and San Antonio, Texas, metro areas by the end of 2024.

McDonald’s is looking to attract customers looking for a quick afternoon pick-me-up, offering savory and sweet snack options in addition to customized coffee beverage. CosMc’s will have a drive-thru-only pay-at-the-stall format with almost no face-to-face interaction.

Zackfia pointed out that the “inherent lack of human interaction” is a major departure from the likes of Dutch Bros and Starbucks which have “the service-centric formats” and emphasize the human touch. The research note also considered the restaurant’s four-stall drive-thru format as “fairly clunky.”

Furthermore, while the fare between the brands is comparable in style, customized coffee drinks and snacks, there is limited difference in pricing. The average discount on menu items at CosMc’s was around 7.5 percent compared to Starbucks. While customers will find standard brewed coffee and tea much cheaper, some items like frozen blended drinks were actually more expensive on average than those at Starbucks.