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McDonald's says coffee fuels its Canada turnaround

McDonald's Corp's Canadian market share is the highest it's been in 15 years, and that's mainly due to its humble drip coffee, the fast food giant's Canadian chief says.

Coffee isn't an obvious point of entry in Canada, where doughnut and coffee chain Tim Hortons borders on a national symbol and Starbucks is also well-established.

Mcdonald's has been selling a "premium roast" blend coffee for five years, but McDonald's Canada President John Betts says that a campaign to trumpet its quality has woken up the brand.

"It all started with the coffee. That is the thing that's turned our business around," he told Reuters in an interview. "We've converted millions of people."

Betts is now on a media blitz promoting McDonald's smoothies, new to Canada. It's another product that puts the chain head-to-head with Tim Hortons, which launched its own smoothies a year ago.

Betts said the fruit and yogurt smoothies offer "very good" margins, and are a logical extension of the McCafe espresso drinks that the chain rolled out across Canada in November. Tims launched similar beverages in Canada and the United States in December.

In September, McDonald's announced a $1 billion US store revamp that is transforming its Canadian restaurants into something more coffee house than burger joint, with softer seating, free Internet and even flat screen televisions and fireplaces in some outlets.

By April, about 65 percent of traditional restaurants will have been renovated, Betts said, and that figure will climb to more than 80 percent by the end of the year.

While Betts is happy with the espresso launch and restaurant renovations, he says it's the cheaper brewed coffee, which McDonald's has promoted with high-profile ad campaigns and aggressive giveaways, that has fueled the chain's sales growth.

Betts said the coffee has helped boost breakfast sales 45 percent over the last three years, though he would not reveal market share figures.

"We were kind of stalled, you know. We weren't focused, we weren't aligned, we weren't that relevant to the customer," Betts said of McDonald's before it started pushing its new coffee hard.

"We're a mature market that got stalled a little, but we're refreshing ourselves, and then things will take off from here."

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