Iced Coffee: Hot Product?

McDonald's major push into the coffee business has drawn a lot of criticism. The chain's plans to install coffee bars in its franchises, a frontal assault on Starbucks, would "alienate customers, confuse its menu and open up a black hole for capital," wrote Fast Company's Chris Dannen in January.

But figures from the NPD Group, cited by the Motley Fool, show that sales of iced coffee at fast-food outlets were up 38 percent in the year as of last March. And they rose 37 percent in the preceding year.

Of course, much of that increase—it's hard to tell how much—is due to the simple fact that iced coffee wasn't previously readily available in fast-food restaurants. Nonetheless, the Motley Fool's Selena Maranjian says there's "big money to be made in carving out a slice of market share" from Starbucks. Further, she notes that while Americans drink about 400 million cups of coffee per day, they drink only 640 million iced-coffee drinks per year. "Can you say 'room for growth'?" she asks.

Yes, but i can also say "niche product." There's no doubt that iced-coffee drinks are growing in popularity. Coca-Cola and others are selling lots of them in stores, for example, even as soda sales decline. But the jury is still out on whether McDonald's coffee bars will make a big dent in Starbucks' market share or, more to the point, yield the kinds of returns needed to justify the massive investments being made by both the company and its franchises.