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02/045/01 . David Bailey . Reuters . Chicago, IL USA  
McDonald's looks to gather steam with coffee bar  

McDonald's customers had their choice of a slice of tiramisu, a cappuccino in a china cup and leather chairs with mahogany coffee tables -- or a Big Mac, french fries, apple pie and shake in cardboard wrapping at formica seating -- as the first McCafe coffee bar in the United States opened in downtown Chicago.

The well-publicised opening on Wednesday brought curious office workers to the cafe, adjoining a busy McDonald's restaurant. Most dallied awhile, taking in the framed French-themed posters, lace curtains, piped-in jazz and gourmet coffee and desserts.

Company officials on hand for the opening took pains not to mention the competition by name, but Starbucks was the first comparison on the lips of customers seated at the metal bistro-style tables.

"I wanted to see if it was really as good as Starbucks," said Sharon Smith, a chemist and Chicago resident who travelled downtown just to check it out. "The espresso was fine, but obviously those are not the regular counter people -- those are corporate who are working behind the counter."

"I like the atmosphere. It is a little dressier than Starbucks and it is actually cheaper," Smith said.

McCafe also offers latte, gourmet teas, hot chocolate, cold smoothies, Nantucket nectars and Evian bottled water. The desserts include cheesecake, carrot cake, chocolate caramel peanut pie and an apple tart.

A 12-ounce latte at McCafe goes for $2.49 (1.74 pounds) before tax, while a downtown Starbucks charged $2.55. The 20-ounce size at McCafe runs $2.99 pretax and $3.40 at Starbucks.

George Mulvey, an equity portfolio manager at Salomon Smith Barney, said he made the 3-1/2-block walk to the McCafe to try it and agreed to bring two coffees back to the office.

"I thought it would be interesting to see what their new concept is," he said. "It's not a bad cup of coffee."

McDonald's opened the first full-scale cafe of this type in Australia in 1993 and has 300 internationally, said Philip Gray, a vice president for the Chicago region. McDonald's hopes to attract office workers, construction workers, tourists and families to the cafe.

A BID FOR NEW CUSTOMERS With more than $40 billion in annual sales, Oak Brook, Illinois-based McDonald's is better known for its mainstay burgers and fries than upscale coffee drinks and desserts.

But increased competition in the United States market, along with limited opportunities for growth, have forced the company to branch out beyond fast food.

It now owns all or a piece of non-hamburger concepts that include Aroma Cafe, Boston Market, Chipotle Mexican Grill, Donatos Pizza and sandwich chain Pret a Manger.

"We want to go after more occasions such as snack, treats, coffee, desserts, and bring in a different demographic customer base," Gray said.

The cafe is situated across the street from Marshall Field's flagship department store, a downtown Chicago landmark, in a space formerly occupied by a jewellery store.

"The drapes, mahogany, leather tables and chairs, granite countertops and nice paintings -- we wanted to do something very distinctive that is different than the normal experience at this location," Gray said.

Sara Lee Corp provides the high-end pastries, a Chicago company makes the soft pretzels, and McDonald's bakes the muffins and cookies on site.

But across the Loop in the heart of Chicago's financial district, computer consultant Frank Kupec said the concept was interesting, but he had some doubts.

"If a Starbucks and a McCafe were next to each other, I have to admit I would probably go to the Starbucks," Kupec said.

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