Taco Bell's new menu items are a major change for the chain

When McDonald's said it intended to launch an entirely new brand, the company's goal seemed unclear.

It already had the ability to offer small-format versions of its namesake brand. So simply being able to operate with less square footage did not seem like a good reason to create a mostly new menu under a different brand name.

Now that the first CosMc's has opened, it seems clear that McDonald's (MCD) - Get Free Report wants to compete with Starbucks and Dunkin' in the lucrative beverage space. That makes sense because beverages — even ones that are labor intensive — come with wide profit margins.

Related: Burger King menu tries something new with the Whopper

CosMc's, it should be noted, sells coffee, but it's not a coffee-based brand. Unlike Starbucks,  (SBUX) - Get Free Report which still keeps coffee as its core focus, the McDonald's spinoff has embraced anything you drink (aside from alcohol) as its reason for being.

"CosMc’s menu is rooted in beverage exploration, with bold and unexpected flavor combinations, vibrant colors and functional boosts," the company said in a news release. "You’ll see a range of specialty lemonades and teas, indulgent blended beverages and cold coffee – think Sour Cherry Energy Slush, Tropical Spiceade and S’mores Cold Brew." 

The new chain will also sell some innovative snacks, and borrow Egg McMuffins (offered all day) and McFlurries from the main McDonald's menu.

CosMc's offers McDonald's a wide-margin formula that's not affected by volatile beef and chicken prices, and it gives the company exposure to the nonmeal market where Starbucks and Dunkin' have excelled.

Yum Brands'  (YUM) - Get Free Report Taco Bell sees the same opportunity, and it has been testing its own way of expanding its beverage platform.

Taco Bell tests a frozen coffee

Taco Bell has always embraced the idea that it might serve customers outside traditional meal hours. In commercials the chain playfully used the term "fourth meal," which leaned into the idea that it might be the late-night bad choice people make after they have already eaten dinner.

The company has also embraced beverages and frozen drinks beyond the traditional fast-food soda offerings. Taco Bell has long offered its Freeze slush-like drinks in a variety of ever-changing flavors including some tied to Mountain Dew's popular flavors. But it has never offered frozen coffee-based beverages.

Now, the chain is going after Starbucks in its own fashion with its own Frappuccino-style frozen coffee beverages.

Taco Bell's new Coffee Chillers are being tested at limited locations in California. They're being offered as an all-day menu item. The chain is testing both Coffee Chillers flavors and Churro Chillers flavors at select stores starting Dec. 15.

These are the new Taco Bell drinks

Taco Bell currently sells basic hot and iced coffees nationwide. It also has a partnership with Cinnabon to sell coffee in its distinct flavor in both hot and iced versions.

"The Coffee Chiller is served in a 16-oz cup that’s swirled with flavor on the inside, filled with blended iced coffee and topped with a layer of cold foam, available in Mexican Chocolate, Caramel Churro and Spiced Vanilla," Chew Boom reported. 

"The Churro Chiller is served in a 16-oz cup that’s also swirled with flavor on the inside, filled with a blended sweet shake and topped with a layer of cold foam and churro crumbles, available in Mexican Chocolate, Dulce de Leche Coffee, Wild Strawberry and Sweet Vanilla."

The new drinks are being sold for $4.19 and are not part of any happy hour promotions.

Taco Bell has not said how long the test will last. The chain has a deep track record of testing an item locally and then rolling it out nationally over the next few months if the test is successful.

Discuss trade ideas with Hedge Fund Managers and experienced Day Traders. Get Real Money Pro now.