With the opening of a new cafe in Xintiandi tomorrow, the line between coffee shops and fast-food joints is getting rather blurry.

McDonald's, known more for its greasy burgers than its tasty java, will open a 50-square-meter McCafe in Shanghai's trendy hangout, selling 12 hot and cold beverages as well as pastries.

But the store won't be selling any Big Macs or french fries. In fact, it would be easy to wander around the new cafe without realizing it's owned by McDonald's, as long as you ignore the golden arches printed on the um-brellas outside.

McDonalds isn't the first fast-food chain to enter the coffee business. More than a year ago, Tricon Global Restaurants Inc. opened a K-Coffee outlet in Xujiahui area. Similar to McCafe, K-Coffee looks more like a Starbucks than a chicken joint.

While that outlet is doing well, the company doesn't look overly eager to open more coffee shops in the city anytime soon.

"KFC is afraid that opening too many coffee shops wouldn't be good for its image as a fast-food giant," said a company insider.

McDonald's sounds more comfortable with the idea of selling coffee.

The company will open more McCafes in town if the market responds well to its Xintiandi outlet, said Shi Wenzhe, general manager at Shanghai McDonald's.

"We wouldn't shift our core business to selling coffee and our market position as a mass fast-food provider remains unchanged," said Shi. "The only thing is that consumers here are really asking for more than eating food."

"We believe we should start pro-moting a certain culture or consum-ing ideas to enrich our brand image."

The new McCafe is one of about 300 worldwide and the third such coffee shop in China. The other two are in Beijing and Guangzhou.

Fast-food suppliers like McDonald's and KFC are betting on lower prices, higher consumer awareness and established sales networks to com-pete with coffee chains like Starbucks.

Drinks and pastries are priced about 30 percent lower than the famous Seattle coffee outlet. A grand latte will be sold at 18 yuan at McCafe, compared with 25 yuan at Starbucks.

Starbucks has opened 23 outlets since it first entered the Shanghai market two years ago.

( eastday.com June 29,2002)