• Crains Chicago Business, Tuesday, October 2, 2007 10:30 AM

McDonald's expects that a blitz of new lattes, cappuccinos and other specialty drinks will add more than $1 billion a year to sales next year, according to company planning documents. The drinks also will require the most extensive revamping of its 14,000 U.S restaurants this decade.

Specialty beverages such as lattes have a high profit margin. In memos outlining the plan, McDonald's estimates the U.S. beverage market at $60 billion a year. It hopes to equip 1,500 restaurants to sell the new drinks by year's-end, with the rest on board by late 2008, the planning documents indicate.

The move is a frontal assault on Starbucks. In test markets including California, Georgia, Michigan and Texas, specialty coffee has increased customer traffic by 44% a week, an August memo from a franchisee group shows. The initial tests show the new plan doesn't require more employees or slow down service.

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