McDonald’s Defends Breakfast `Ferociously’: Henkes

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April 1 (Bloomberg) -- Technomic Vice President David Henkes discusses the fizzling out of diet soda sales and the breakfast battle between taco Bell and McDonald’s on Bloomberg Television’s “In The Loop.” (Source: Bloomberg)

Taco bell was, right?

Absolutely.

Good morning.

When i first heard about taco bell coming out with breakfast, i thought the smarter play would be to position themselves as an alternative to mcdonald's. with this advertisement touting the people named ronald mcdonald, they are going right i'm a donald's. they have responded by giving away free coffee.

We have always expected them to ferociously defend the breakfast turf.

Is that an effective move by mcdonald's? they have taken a bemused approach to this.

I think it is the right tone to take.

No doubt we have seen mcdonald's amah anyone -- any time anyone has come in into the breakfast base, they have defended it.

Free coffee is a new move for them.

It is clear they do not intend anyone to tread lightly into the space and will defend it.

Mcdonald's owns about one third of the breakfast market right now.

So there is still quite a dominant wars.

I am assuming taco bell and starbucks smelling blood in the water when it comes to mcdonald's giving up its position.

I think it is driven more by lack of growth.

When you look at the white space around breakfast, still a lot of growth opportunity, despite the fact that mcdonald's owns it.

So i think they look at breakfast as incremental growth opportunity.

Taco bell doing pretty well with the innovation needs to keep the ball rolling and will focus on breakfast as a new vehicle for them in 2014. rex you talk about how important coffee is to the whole breakfast menu into the consumer.

Was it a mistake that taco bell did not introduce a coffee line and focus on that when they rolled out the new menu?

I think so.

Convenience and coffee are the big drivers for successful program -- breakfast program.

While taco bell has a coffee program, it is not positioned as a premium coffee program.

I fully expect them to become more successful and grows a breakfast program to do something and coffee because that is a critical component and something consumers look or when they are shopping around for breath test.

Why did you not like the social media strategy by taco bell?

I think when you look at social media and what they are doing with ronald mcdonald him and they are raising the ire.

I think they are hoping they are getting the ire of for them.

Probably not necessary to do that but i think they're trying to make a wave and create a buzz for themselves was social media.

Maybe they feel like they can take rigor risks, right?

I think so.

I think they are starting essentially from zero and looking to create buzz and excitement and generate word of mouth.

We are talking about it right now so at least somewhat effective in getting people to notice the breakfast program.

I think they have an interesting program.

We will see how it does over the next six months.

All of these brands you and i've both grew up with.

Coca-cola, pepsi -- they are all in a decline.

I do not know if you saw the statistic yesterday that diet coke and diet pepsi are declining way faster than the full sugar counterparts.

That was a stunner.

I would have to imagine that affects the fast food industry.

When you look at the profitability and volume, it is incredible.

It is a big boost to the bottom line.

It had heard -- has her places like mcdonald's and all the places we are talking about.

When you look at beverages and carbonated beverages, health and wellness driving this.

There has been news around diet sodas and perhaps not as healthy as you thought.

You look at innovation and excitement around different flavors and flavored juices and waters, and tea is hot right now so there is a lot more alternatives for people that carbonated soft drinks are not as exciting as they used to be.

I used to feel good to order a big mac and diet coke.

I guess not anymore.

Plain old water.

Thank you so much.

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