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McDonald's to sell ground coffee in Canada

TORONTO (Reuters) - McDonald's Corp will start selling ground coffee in major Canadian stores in November, in a new challenge to rivals like Starbucks Corp and Dunkin Donuts.

The coffee, priced at C$6.99 for 340 grams, launches as McDonald's steps up its expansion in Canada, after holding back for more than five years.

The fast food chain's Canadian President John Betts credits the coffee business for a turnaround at his unit, and now sees the potential for a much larger footprint across the country.

"This year, we're going to build more restaurants than we've built in the last seven or eight years," he said in an interview on Thursday. "Next year, it's going to ramp up from that."

Around 30 new stores will open by the end of 2012, Betts said. He did not give specific figures for future periods. McDonald's has about 1,400 outlets in Canada.

Betts' upbeat message stands out against last week's earnings release, when McDonald's reported its worst quarterly restaurant sales growth in nine years thanks to tough competition in the United States.

Betts said the chain built too many stores too quickly in Canada. But in the last three years, he says, its coffee business has made all the difference.

Coffee is not an obvious point of entry in Canada, where Starbucks Corp is ubiquitous and doughnut and coffee chain Tim Hortons Inc borders on a national symbol. Between McDonald's coffee push and Tim Hortons' expanding lunch menu, the two chains are increasingly going head to head.

Over the long term, Betts said, McDonald's may also look at the expanding market for single-cup coffee brewing.

The company does not currently sell K-cups, used in Green Mountain Coffee Roasters Inc's Keurig machines, or similar products for competing systems.

"Down the road, as our coffee journey and beverage journey evolves, we'll look at other things, certainly grocery, and K-cups and all those kind of things," said Betts.

Tim Hortons recently entered the single-serve coffee market, joining Starbucks, Dunkin' Brands Group Inc and many others.

(Reporting by Allison Martell; Additional reporting by Lisa Baertlein; Editing by Andre Grenon and Andrew Hay)

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