In its biggest menu expansion in decades, McDonald's Corp. (MCD) specialty coffee launch will target coffee drinkers of all stripes looking to splurge on "affordable luxuries" while in the grips of a recession.

"Anyone who is a coffee drinker and wants a great cup of coffee at an affordable price," McDonald's USA President Don Thompson said when asked the target audience to McCafe.

McDonald's is placing a big bet coffee with McCafe, with a national advertising blitz that started Tuesday. In addition to new drip coffee and launch of frappes and smoothies next year, McDonald's sees the beverage launch as adding up to $1 billion to annual sales.

McDonald's, which has benefited during the recession as consumers have sought cheaper places to eat, now hopes customers will see value in its drinks, where espresso-based drinks typically cost $2.29 for a 12-ounce cup to $3.29 for a 22-ounce drink. Analysts see the drink platform as the main driver of sales growth over the next couple of years at McDonald's, so it's critical that the chain deliver.

"In economies like this one, people are still looking for affordable luxuries," Thompson said. "These are beverages that are priced very affordably."

In casting a wide net, McDonald's is taking direct aim at coffee chains like Starbucks Corp. (SBUX) and privately held Dunkin Donuts, but the burger chain is downplaying the competition. "We've never gone after 'competitors'," Thompson said. "In the game of retail, in particular satisfying consumer needs, the goal isn't to go after anyone."

Some McDonald's franchisees have a different tack, as one advertising cooperative took direct jabs at Starbuck's pricier perception with a billboard in Seattle that read "Four bucks is dumb."

Competitors aren't letting the Golden Arches into their arena without a fight. Dunkin Donuts stores have slashed prices on hot and cold latte drinks by about 15% in some markets for a limited time. Meanwhile, Starbucks on Tuesday also said it will sell its grande iced coffee for $1.95 over the next two months, shaving up to 45 cents off the regular price.

McDonald's will also have to overcome customers who are brewing more of their coffee at home, and whose new-found thriftiness has some cutting all luxuries out of their budgets.

Other fast-food chains are stepping up the pressure on value advertising, with chains like Sonic Corp. (SONC) and Yum Brands Inc. (YUM) launching national value menu in recent months in an attempt to take a bite of McDonald's dominance on that end. Even though McDonald's will talk more about pricier drinks in the coming months, it will still hammer away on its Dollar Menu in advertisements, as well as menu stalwarts like the Quarter Pounder sandwich and Chicken McNuggets that have helped sales in recent quarters.

"Now, we're talking about value, our core menu and, incrementally, about beverages," Thompson said.

McCafe has now been installed at about 11,000 of McDonald's 14,000 locations in the U.S., about as far as the expansion will go due to limitations at some stores.

Part of the rollout, several years in the making, also reconfigured the drive-through booths to make it more efficient. Most of McDonald's sales now go through the drive-through lane, though the layout had not been updated in years.

Most of the $100,000 investment required per store went toward optimizing the drive through, Thompson said, which has been able to save precious seconds off of service times.

McDonald's shares were up 48 cents, or 1%, in recent trading at $53.24, and have fallen about 14.3% in value since the beginning of the year, while the Dow Jones Industrial Average is down about 4%.

-By Paul Ziobro, Dow Jones Newswires; 201-938-2046; paul.ziobro@dowjones.com