After serving the world billions and billions of burgers for well over a half-century, McDonald's ruthlessly optimized, indefatigable system for pumping out fast food has seemingly reached its zenith. If so, it's probably a good time to tear up the accepted playbook and start over. Enter CosMc's, the fast-food chain's newly revealed store concept that is launching its first location in Bolingbrook, Illinois later this month. While it may not roll off the tongue like "Mickey D's," the menu's purposeful tilt toward "beverage exploration," combined with an emphasis on speedy drive-through transactions (meaning little to no seating), suggests that Starbucks and Dunkin' -- not to mention grab-and-go coolers in corner stores and mega-marts -- face a potentially daunting threat to their dominance of mid-afternoon drink occasions. McDonald's splashy commitment to a specialty beverage-centric concept store -- with 10 locations due to open in 2024 -- reflects its belief in the opportunity. While fountain drinks (via partnership with Coca-Cola) have always been high-margin items, CSDs offer a relatively limited platform for growth relative to offerings from higher base-price items from Starbucks, over half of which generate a further $1 billion in revenue through fees for customizable add-ons like syrups. In its earning report last month, the cafe chain highlighted strong performance from fall-themed drinks and an 8% increase in same-store sales, combined with insatiable demand for cold coffee drinks (76% of total beverage sales). Despite inflationary pressures, consumers are still eager to make high-ring specialized beverages a part of their out-of-home routine. Boasting a menu of slushes, frappes and “Signature Galactic Boosts” (like the boba-spiked Sour Cherry Energy Burst) alongside new food items, the idea is clearly to make a visit to CosMc’s something more than your standard McDonald’s run. How will that translate to CPG? Probably well for Coca-Cola, which will continue to provide CosMc's full complement of CSDs alongside brands like Powerade, smartwater and Topo Chico. But its broader impact seems hard to predict at this point. Should CosMc's connect, it could serve as a national showcase to create awareness for niche categories; think boba tea and turmeric spiced lattes, but recontextualized (for better or worse) under the auspices of the world's biggest restaurant chain. That rising tide could be a boon to others, and with the McCafe brand largely stalled as a retail brand, don't be surprised if popular menu items are eventually used to jumpstart that business again. But for others, CosMc's may help suck the air out of an already suffocatingly crowded room. As on-premise players refine their approach, independent RTD brands positioned to play against the big restaurant chains -- like Super Coffee's better-for-you take on Starbucks Frappuccino, certain iced teas or even some of the next-gen gut health sodas -- may find themselves squeezed out of some on-the-go occasions. Interest is industry-wide, with Taco Bell getting into the act with custom energy drinks - heck, there’s already a lawsuit around the way Panera has marketed an energy product! If consumers buy in, CosMc’s could also potentially eat into gains in fountain beverages in c-stores, which were up around +10% in the cold category and +15% in the frozen category in 2022. Robust, digital-native loyalty programs are helping capture and engage repeat shoppers, too. And with another deep-pocketed player in the mix, it will be tough for even a known quantity to generate sustained traction on-premise, as Black Rifle Coffee learned this year. That’s all we know for now – we’ll withhold further comment until a couple billion are served. | 
