McDonald’s (MCD) Stock Eyes Upside as Energy Drink Push Takes Aim at Starbucks

TLDR

• McDonald’s is adding energy drinks and specialty sodas to U.S. menus, including a Red Bull Dragonberry Energizer.
• New drinks like a Dirty Dr Pepper and Mango Pineapple Refresher are set to launch next month.
• Energy drinks are expected to roll out in August.
• McDonald’s plans to price the new beverages below rivals like Starbucks, Dutch Bros, and Sonic.
• MCD stock is flat year-to-date, up just 0.02%, with a consensus Moderate Buy rating and an average price target of $349.48.

McDonald’s is expanding its cold drink menu at U.S. locations later this year, according to a Wall Street Journal report citing internal company documents.

The new lineup includes a Red Bull Dragonberry Energizer, a Dirty Dr Pepper, and a Mango Pineapple Refresher. The first wave of drinks is expected to hit menus next month, with the energy drink range following in August.

Reuters was unable to immediately verify the report. McDonald’s did not respond to a request for comment.

McDonald’s Corporation, MCD

McDonald’s has been testing similar concepts for a while. Drinks like a Sour Cherry Energy Burst and a Blackberry Mint Green Tea were trialled through its short-lived CosMc’s concept before it was wound down.

The company is now bringing that learning to its main restaurant chain, targeting a slice of a global beverage market worth over $100 billion.

Priced to Compete

McDonald’s plans to price the new drinks below what competitors charge. Starbucks (SBUX), Dutch Bros (BROS), and Sonic are among the chains it is looking to undercut on price.

That pricing strategy fits with the company’s broader value push. Earlier this month, McDonald’s introduced menu items at $3 or less and launched a $4 breakfast meal deal in the U.S.

CEO Chris Kempczinski said in February that the value strategy was showing results, pointing to increased visits from lower-income consumers.

The drinks move builds on that same logic — give customers more reasons to choose McDonald’s over a pricier alternative.

A High-Margin Opportunity

Beverages are among the most profitable items a restaurant can sell. The cost to produce a drink is low, but the selling price is relatively high compared to food items.

Many McDonald’s franchisees have already invested in new equipment to prepare these beverages. The company has worked with operators to make sure drinks can be made without slowing down service.

The expectation is that the new drink range will deliver strong profit margins for franchisees, who run the majority of McDonald’s locations.

Demand for energy drinks and specialty sodas has been rising as more consumers move beyond coffee and tea. McDonald’s sees this as a chance to capture more of that spending inside its existing locations.

MCD stock is essentially flat year-to-date, up 0.02%, as investor attention has largely stayed focused on high-growth sectors.

Among 25 Wall Street analysts, the stock carries a consensus Moderate Buy rating, based on 15 Buys and 10 Holds over the last three months.

The average price target stands at $349.48, implying around 14.3% upside from current levels.

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