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As the McDonald’s vs. Taco Bell Breakfast War Rages On, More Brands Join the Fight

Dunkin' Donuts, Starbucks and Carl's Jr. work on innovations of their own

Last year, fast-food breakfast sales totaled $34.5 billion, says research firm Technomic. Illustration: Natalie Andrewson

Free breakfast. It's the latest marketing strategy two fast-food giants are wielding in what has been dubbed "the breakfast war."

The stakes are high—fast-food breakfast sales last year rang up $34.5 billion, with McDonald's accounting for one-third of that business, per research firm Technomic. "Breakfast is a very routine purchase," said Allen Adamson, North American chairman at brand consultancy Landor. "Most people get their coffee in the same place; they start their day with a ritual. If you can get them to start their day with you, it's a real strong business because they're coming back every morning."

The war was launched in March 2014, when Taco Bell unveiled its breakfast menu. It has escalated to the point where chains are now offering free food. This past January, McDonald's rolled out a six-month promotion at select locations offering free coffee with breakfast. Then, for two weeks in April, McDonald's franchisees in Philadelphia accepted Taco Bell receipts in exchange for Egg McMuffins. Taco Bell returned fire last week, proclaiming Cinco de Mayo "Breakfast Defector Day" and giving away Biscuit Tacos.

And McDonald's and Taco Bell are up against a host of players, like Dunkin' Donuts, Carl's Jr. and Starbucks—all cooking up the most important meal of the day.

Breakfast is the fastest-growing segment for restaurants, noted John Costello, president of global marketing and innovation for Dunkin' Brands, which recently introduced the Bacon Guacamole Flatbread Sandwich on its breakfast menu. "Dunkin' Donuts has proven the ability to grow in this competitive space by offering highly differentiated products," said Costello.

The exec said Dunkin' will stick with its successful "America Runs on Dunkin'" campaign and will not tackle McDonald's head-on as Taco Bell did with its Soviet-styled "Routine Republic" campaign in March, and last year's "Ronald McDonald" spot, which featured guys named Ronald McDonald endorsing its breakfast menu.

Other chains are trying to cash in, too. CKE Restaurants' Carl's Jr. and Hardee's unwrapped their Mile High Bacon, Egg & Cheese Biscuit on April 20 (aka Weed Day). "There are still opportunities for growth, and you see chains looking to grow in that space," said Brad Haley, the company's CMO. "It's not an easy thing to do. Breakfast consumers are very habitual by nature. There's a very small repertoire of what they will eat. It's usually eggs, cheese, meat and bread. Most people could eat the same thing for breakfast every day of the week."

Starbucks has enjoyed a surge in breakfast sales. Last month, the coffee chain attributed its solid Q2 earnings to its breakfast sandwiches, which posted 35 percent year-over-year growth. "Dreaming up all kinds of amazing food for our customers is what we love to do," a Starbucks rep said. "We continue to listen to our customers and build on the morning coffee occasion to create a breakfast ritual for our customers."

Analysts believe these are merely the first shots in a long-term battle to dominate breakfast, with more chains introducing new and improved menu items to appear nimble and flexible—qualities valued by consumers. But some wonder how much room there is at the table. "If fast-casual restaurants such as Chipotle enter the category, it is virtually guaranteed that market share will be balkanized," said Sean Cullen, evp of product and technology at ad tech firm Fluent.

And even as breakfast menus continue to expand (McDonald's added kale-infused breakfast bowls last week), it will only go so far with increasingly health-conscious consumers, according to industry watchers. As Agathe Blanchon-Ehrsam, CMO of brand consultancy Vivaldi Partners Group, put it, "Breakfast menus are a Band-Aid for [quick-service restaurants], whose traditional menus don't correspond to patrons' needs anymore."

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