McDonald's to introduce more drinks, expand restaurants

McDonald's Corp. executives said Wednesday they're "lovin'" their new McCafe espresso drinks that launched nationally on May 5, and they plan to introduce smoothies and other drinks next year, all while the chain adds another 1,000 restaurants, mostly overseas.

McDonald's has been weathering the recession by offering more food and drink selections, especially gourmet coffees in an attempt to dethrone Starbucks and other food outlets.

New smoothie and frappé drinks are expected to be introduced next year. The chain is also testing bottled beverages, including flavored waters and sports drinks, said Don Thompson, president of McDonald's USA.

"It's part of our hydration strategy," Thompson told reporters during a news conference at the company's headquarters in Oak Brook. "The jury is still out on energy-based drinks because of some concerns for children."

McDonald's officials welcomed more than 400 shareholders early Wednesday during their annual meeting in Oak Brook, focusing on the chain's global success despite a tough economy. Chief Executive Officer Jim Skinner told shareholders "our momentum is continuing in 2009," saying the first quarter showed operating income rose 5 percent.

"We are operating from a position of strength," Skinner said. "Focusing on our customers and our restaurants through the Plan to Win (internal program) allows us to operate well in any environment."

Skinner later told reporters that adding another 1,000 new restaurants should continue despite the recession.

"Our franchises have access to credit," Skinner said. "It's full speed ahead."

McDonald's has about 32,000 restaurants in 118 countries. When the global downturn happened last fall, the chain felt a quick hit, but later recovered.

"About five or six years ago, we positioned ourselves to operate in this type of an economy," Skinner said. "I don't think you want the CEO to say the economy has bottomed out. But during the previous recessions, McDonald's operated well then and we're operating well now."

Of the 1,000 new restaurants, only 150 will be in the United States. Another 145 will open in China, one of its fastest growing markets. Another 30 or so will open in European countries, said Ralph Alvarez, president and chief operating officer.

In other business, some shareholders complained to Skinner about the lack of information on nutrition and calories for each product. Some state and local governments require such postings.

Skinner said he was "supportive of the right approach," but said there were too many different local laws. During a briefing later with reporters, Alvarez said they support a federal mandate that would override state and local laws and provide a more uniform approach.

Also, a shareholder proposal wanted McDonald's to use more humane treatment of chickens and urged the purchase of eggs from cage-free chickens for its U.S. restaurants. The proposal was supported by animal rights groups, including the Humane Society of the United States, which owns 101 McDonald's shares, PETA, which owns 79 shares, and others.

However, preliminary voting results showed the measure lost when only 5 percent of shareholders supported the policy.

"In the last eight years, McDonald's has done nothing to lessen the suffering of chickens during slaughter," PETA spokeswoman Lindsay Rajt told Skinner and other executives during the meeting.

PETA pressed its message further by staging a protest later at a McDonald's restaurant on 22nd Street in Oak Brook, less than a mile from the headquarters. PETA members wore red bikinis and were inside a tank of water with the message: "McDonald's Scalds Chicks to Death."

McDonald's said it works with independent animal welfare experts and makes decisions based on science to promote improvement in animal welfare as part of broader supply chain initiatives, Bob Langert, vice president of McDonald's Corporate Social Responsibility, said in a statement.

"McDonald's continues to support our chicken suppliers' use of both controlled atmosphere stunning and electrical stunning," Langert said. "There is no conclusive scientific consensus that one practice is better than the other, however, we recognize that in either method, good management practices are critical. It is also important to note that in the U.S., there are no large-scale chicken producers that currently use the CAS method. Therefore demands to purchase chickens from this method to meet McDonald's supply needs are not viable."