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Originally published Tuesday, September 24, 2013 at 7:09 AM

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McDonald’s aims to lure Starbucks crowd with pumpkin-spice lattes

McDonald’s has been introducing pricier items s to maintain profitability in the face of higher labor, occupancy and operating costs.

Bloomberg News

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CHICAGO — McDonald’s is adding pumpkin-spice lattes to lure the Starbucks crowd and boost traffic.

The McCafe pumpkin latte — a mix of espresso, milk and flavored syrup — will come in three sizes and be available with whole or nonfat milk, the Oak Brook, Ill.-based company said. A 16-ounce latte with whole milk has 340 calories and will cost $2.89. A regular coffee is $1. The lattes are being introduced this month and will sell through mid-November.

McDonald’s, the world’s largest restaurant chain, has been introducing pricier items such as chicken wings, McWraps and steak breakfast sandwiches to maintain profitability in the face of higher labor, occupancy and operating costs. At the same time, the company is expanding its value menu to draw bargain-seeking diners.

“They’re trying to further refine the so-called barbell” strategy of selling low-priced, value items along with more expensive fare, John Gordon, principal at San Diego-based Pacific Management Consulting Group and adviser to restaurant franchisees, said in an interview. They really are trying to sell the higher-price food because “they need the margin.”

The operating margin at McDonald’s U.S. company-owned restaurants narrowed to 18.7 percent in the quarter ended June 30 from 19.8 percent a year earlier.

Starbucks has sold 200 million pumpkin spice lattes in the nine years since it introduced them, said Alisa Martinez, a company spokeswoman. The drink has the same number of calories as McDonald’s offering and a 16-ounce one sells for $4.55, on average. The Seattle company, which has about 11,200 U.S. cafes, also sells salted-caramel mochas, hazelnut lattes and is introducing new bakery items nationwide.

McDonald’s may be able to steal some Starbucks customers because Americans are focused on finding deals now and pumpkin has become such a popular flavor during the fall season in the U.S., Gordon said.

“Everybody is doing pumpkin this fall,” Gordon said.

McDonald’s also will begin serving hot beverages in paper cups instead of polystyrene foam containers, bowing to customers’ preference for a recyclable option, Ofelia Casillas, a spokeswoman, said in an email. Changing all 14,100 U.S. locations to paper will be a “multiyear” process, she said.

McDonald’s has recently struggled in the United States, where it is facing a tough consumer environment. In August, sales at stores open at least 13 months rose 0.2 percent domestically, falling short of the 0.8 percent gain projected by analysts. Earnings have trailed estimates for the past two quarters.

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