Skift Take
A poultry push coincides with a shift a way from beef that many diners aspire to. And we all know that better quality is where McD's needs to start.
— Jason Clampet
McDonald’s Corp., aiming to extend a three-year growth run, is betting that it can attract customers by being more like Chick-fil-A Inc.
One of the company’s top priorities is to become a “credible chicken player” in the U.S., according to internal McDonald’s documents reviewed by Bloomberg News. The initiative has been dubbed “Better Chicken,” the fast-food giant said in a letter to franchisees, who operate about 90 percent of its U.S. locations.
McDonald’s has already taken steps to elevate its chicken sandwiches and nuggets, which were long seen as a serviceable if uninspiring part of the menu. The chain has vowed to stop serving poultry with antibiotics, and it removed artificial preservatives from McNuggets. It also rolled out Southern-style sandwiches and tenders, which are coated in a crispy buttermilk breading that’s similar to what Chick-fil-A offers.
The idea now is to build on that push and establish McDonald’s as a top-tier chicken restaurant — rather than just a burger joint.
“It’s definitely a transformational era for McDonald’s,” said Jason Moser, an analyst at Motley Fool. “Chicken is part of that.”
The stakes are high, especially as consumers eat more chicken than ever before. Last year, they consumed 92 pounds on average, compared with less than 57 pounds of beef, according to estimates from the Department of Agriculture. At the same time, Tyson Foods Inc. and other chicken producers are investing in new processing plants, wagering that the meat will become an even bigger part of Americans’ diets.
Reducing Red Meat
Chicken has the aura of being healthier, which is helping drive the trend, Moser said. Many Americans are limiting the amount of red meat they consume, so McDonald’s traditional burger-heavy lineup may be less relevant.
“It would make sense to build a menu that has more chicken,” he said.
The “Better Chicken” effort may involve selling meat that tastes like it’s pressure-fried, according to the letter to franchisees. That technique is known for creating a crispy coating and juicy interior. It’s also an approach used by Chick-fil-A.
McDonald’s, based in Oak Brook, Illinois, declined to comment on the specifics of the letter. But adding new foods “is one of the many ways we are transforming the McDonald’s experience,” spokeswoman Terri Hickey said in an email. “We’re committed to generating even more excitement around the core menu items our customers love — including our chicken offerings.”
Cooking Changes
Chris Kempczinski, McDonald’s U.S. president, said last year that the company was re-evaluating both its burger and chicken offerings in a bid to improve quality. That includes everything “from the proteins that we use, to the equipment in our kitchens, to our cooking procedures.”
It’s not clear how far McDonald’s will tilt its menu toward poultry. Part of its “Better Chicken” push may hinge on the way food is marketed. But it makes sense to try to mimic Chick-fil-A, said Bloomberg Intelligence analyst Michael Halen.
The Atlanta-based company, which is credited with inventing fried-chicken sandwiches, has posted the highest average restaurant sales of the top 50 fast-food chains, according to QSR magazine. In 2016, Chick-fil-A generated $4.41 million per location. That compares with just $2.55 million for McDonald’s.
Northern Expansion
Chick-fil-A also has steadily expanded beyond its Southern perch. Despite drawing controversy for comments made by one of its executive opposing gay marriage, the company has made forays into New York and Southern California in recent years. Now, it has about 2,200 restaurants across the country.
Chick-fil-A is praised for its customer service, but food quality is central to its success, Halen said. In that area, McDonald’s is still playing catch-up. Its chicken also isn’t as well perceived as the fare at Wendy’s Co., he said.
But McDonald’s is making progress. Its new buttermilk crispy tenders helped sales in the fourth quarter, the company said last month.
The industrywide shift has prompted changes at other chains too. Burger King revamped its chicken sandwich last year and it “performed particularly well,” the company said this week.
Even Shake Shack Inc. — famous for its burgers — is increasingly turning to poultry. It’s currently trying out a new griddled chicken sandwich, which has a “healthier perception,” Chief Executive Officer Randy Garutti said last month.
In Canada, McDonald’s has been pushing its Seriously Chicken lineup, which includes Canadian-raised, grain-fed poultry slathered with guacamole. The move is helping bolster McDonald’s brand image and fueling profitable sales growth, CEO Steve Easterbrook said last month.
Easterbrook, who took the helm in 2015, pulled the company out of a sales slump by adding all-day breakfast and modernizing its restaurants.
Refining its chicken offerings is a logical next step, Halen said.
“It makes a lot of sense,” he said. “Chicken is becoming more and more popular.”
©2018 Bloomberg L.P.
This article was written by Leslie Patton from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].
