Grab a Cold Brew With Your Burger. Why McDonald’s and Others Are Big on Beverages.

Taco Bell is selling energy drinks like Pineapple Lime or Tropical Punch. Other fast-food restaurants are offering new beverages to boost their bottom line. (Courtesy Taco Bell)

Fast‑food giants are betting big on beverages—not just as an add‑on but as a core growth engine. With high margins, frequent consumption, and Gen Z’s social‑media allure, drinks could offer chains a chance to turn around declining foot traffic.

Balancing complexity and execution is key. Consumers like novel drinks, but don’t crave too many options or overly complicated concoctions. Simpler recipes, visual wow factors, and a lean operation could be critical to success.

Fast‑food chains have struggled with fewer customer visits and sluggish sales since last year, as aggressive price hikes, tariff headwinds, and shifting consumer preference toward healthier food have weighed on the businesses.

As of Monday’s close, McDonald’s shares have gained 13.8% over the past 12 months, while Taco Bell owner Yum! Brands increased 4.2%. Burger King owner Restaurant Brands International and Wendy’s saw their stocks fall by 6.8% and 38.5%, respectively.

Sales trends have improved in the latest quarter thanks to fast-food chains’ aggressive promotions and value deals. Still, the challenges have forced them to look for new ways to get customers to return more often and spend more.

Compared with food, beverages are relatively easy to make, requiring less labor and supply-chain complexity. Drinks also have a higher profit margin than food, which is attractive at a time when value meals are cutting into margins at fast-food restaurants.

There is plenty of room for growth. Many customers skip drinks when placing meal orders, so it’s an easy boost if they are enticed to add one. Bold flavors and attractive visuals could fuel spontaneous purchases.

McDonald’s recently announced plans to test a range of cold coffees, fruity refreshers, crafted soda, and energy drinks at around 500 U.S. restaurants, starting in September. Some of the offerings include toasted vanilla frappé and a strawberry watermelon iced drink.

McDonald’s has tested new beverages since 2023 through its spinoff CosMc’s, which has now closed. Some CosMc’s drinks are being integrated into the chain’s regular menu in the broader pilot.

“We’re seeing real momentum in beverages, with more people—especially our Gen Z fans—turning to cold, flavorful drinks as a go-to treat,” said Alyssa Buetikofer, McDonald’s U.S. head of customer experience and marketing.

McDonald’s wants to lure customers at all times of the day—from the morning boost to afternoon cool-down. “We’re not just serving drinks—we’re creating new reasons to visit, new ways to enjoy, and new moments to savor,” said Buetikofer.

In the late 2000s, McDonald’s foray into coffee under McCafé expanded its appeal to new demographics, enhanced its dominance at breakfast, and boosted its revenue at a time when many other restaurant chains suffered from the global recession.

McDonald’s isn’t the only chain eyeing a beverage expansion. One day after McDonald’s announcement, rival Burger King said it has expanded its lineup this summer with lemonades and iced coffee with flavored cold foam.

Wendy’s has also added cold brew with cold foam and fruit-flavored energy drinks to its summer lineup. “Beverage innovation will be a key enabler of growth across multiple dayparts, especially breakfast and snacking occasions,” interim CEO Ken Cook said on a recent earnings call.

Last December, Taco Bell launched a “Live Mas Café” inside one of its California locations, offering over 30 signature beverages from caffeinated aguas frescas to churro‑inspired frappes. The company said the cafe was inspired by Gen Z’s love for customized drinks.

Six months later, management said the test location has seen a 40% sales lift, and it plans to launch 30 more such cafes by the year end. Taco Bell also introduced a nationwide lineup of Refrescas drinks, including a strawberry and passion fruit drink with green tea, and a pineapple lime energy drink. The goal: $5  billion in beverage sales by 2030.

Live Más Café is about pursuing beverages “in a big way, not just a small addition to the menu,” David Gibbs, CEO of Yum! Brands , said in the latest earnings call.

To be sure, the endeavor into beverages isn’t foolproof. Novelty can attract attention, especially if fueled by social media. But the zeal could falter once the viral buzz fades, and when the reality of constrained budget hits, beverages might be the first to get cut.

“Drinks are definitely a nice thing to have, but not a must have,” says Neuberger Berman analyst Kevin McCarthy. “If consumers are getting pinched, it is a challenging piece of the overall equation for fast food.”

McDonald’s seems confident about beverages’ pricing power. “We’re not going to have to go all the way to putting everything on the value menu,” said CEO Kempczinski on the latest earnings call. “You can actually get a lot of full margin products from these beverage offerings.”

Customizing can maintain consumer enthusiasm, but excessive variation could slow service, cause workers’ stress and potential mistakes. Even Starbucks —which has been in the beverage business for decades—had to cut its menu due to operational challenges.

“The risk is that you mess up operations and slow down throughput, especially at drive-throughs,” says BTIG analyst Peter Saleh. “You don’t want to lose the customer that’s coming in for the core product because somebody else is coming in for a beverage.”

Wendy’s CEO Cook said the chain’s new energy drinks will be available through its existing fountain soda dispenser, which helps avoid complex operations. The foam add-ins for cold brew are also easy to execute, he adds.

Too many drink varieties might distract core food customers. “I’m always wary when a company tries to expand beyond its core competency and what consumers gravitate to the brand for,” says Neuberger Berman’s McCarthy. “You run the risk of diluting what the brand stands for.”

Some are worried that fast food’s endeavor could encroach on territories of beverage chains like Starbucks, as McDonald’s and others leverage their massive drive‑thru scale, lower prices, and bundle selling to compete for consumers’ beverage budget.

BTIG’s Saleh thinks it’s premature to assume that. He noted that when McDonald’s launched McCafé over a decade ago, its push into coffee—and the heavy advertising that went with it—lifted sales for everyone.

In response to Barron’s inquiry about potential competition, Starbucks pointed to CEO Brian Niccol’s remarks during the third-quarter earnings call, which highlighted the chain’s “handcrafted beverages, welcoming coffeehouses, and the human connection that brings it all together.”

Write to Evie Liu at evie.liu@barrons.com