McDonald's Menu Blitz Is Heating Up the Fast-Food Wars
Sep 11th 2013 1:39PM
Updated Sep 11th 2013 1:40PM
It's time to loosen your belts, restaurant investors! The battle for your fast food budget is starting to get interesting. On Tuesday, McDonald's stock rose around 1% during intra-day trading after the fast-food giant reported August same-store sales growth of 1.9%.
Curiously enough, however, the chain achieved the better-than-expected overall result despite the fact that comparable sales fell 0.5% in its Asia/Pacific, Middle East, and Africa operations, and rose just 0.2% from the year-ago period in its massive U.S. division.
This also comes on the heels of Yum! Brands' recent SEC filing that showed that, while its own China Division same-store sales declined around 10% year over year, the company is readying itself for a rebound in the Middle Kingdom by the end of the fourth quarter.
To be sure, while weak sales in China have largely held shares of Yum! Brands back so far in 2013, McDonald's' domestic weakness has remained one of its most significant limiting factors this year, as well. So far, shares of both companies have lagged the broader market by more than 7% and 10% year to date, respectively.
That said, shares of Wendy's have enjoyed a resurgence this year, skyrocketing more than 77% so far in 2013, thanks largely to its compelling higher-end menu items like the Pretzel Bacon Cheeseburger, and Image Activation reimaging program, which aims to modernize the look and feel of its existing locations:
Don't get me wrong... I've already written that I think Yum!'s weakness is a good thing, remembering it should benefit from improving Chinese sales while, at the same time, implementing its perfectly achievable plans to more than double U.S. Taco Bell revenue over the next eight years.
But McDonald's, for its part, certainly isn't sitting on its hands while Yum! and Wendy's attempt to grab market share. In a press release yesterday, for example, McDonald's notes that Europe comparable-store sales benefited from the recent introduction of blended-ice beverages in the U.K., "strong premium food evens in the U.K. and Russia," and the company's emphasis on its core products in France.
But two of those three strategies (in blended-ice beverages, and core product emphasis) are either ineffective, or simply unavailable in Mickey D's long-established U.S. market, so they're working hard to improve domestic sales in other ways.
Its release also vaguely states, "Moving forward, the U.S. is intent on enhancing results by strengthening its value leadership and featuring relevant new product offerings across all dayparts and price tiers."
What, exactly, does that mean?
In short, McDonald's is planning on solidifying its industry-leadership position by relying on its continuously evolving menu, through which it hopes it can entice more hungry patrons to order up, instead of choosing the equally compelling promotions and menus from the competition.
Monday, for example, marked the beginning of McDonald's nationwide roll-out of its "Mighty Wings," a process which should be complete less than two weeks from now. This should worry Yum!, in particular, considering that both its KFC and Pizza Hut franchises rely on similar chicken-wing offerings to differentiate themselves from the competition.
Yum!, on the other hand, is also planning an early-morning assault on McDonald's key breakfast daypart by launching its own breakfast menu at all Taco Bell locations nationwide by the end of this year. Unsurprisingly, McDonald's took the news in stride as it unveiled the meaty new Steak, Egg & Cheese McMuffin earlier this month, which it plans to ultimately make available in around 9,600 of its more than 14,000 U.S. locations.
In addition, I noted just a few days ago that McDonald's is also considering rolling out a new Extra Value Menu, dubbed, "Dollar Menu & More," featuring items at price points of $1, $2, and $5 -- the last of which will be utilized primarily for shareable items like the 20-Piece McNuggets.
What's more, as fellow Fool Rich Duprey pointed out yesterday, McDonald's is kicking off the NFL season by testing out an aptly named "Blitz Box," which aims to feed several people at once by including two Quarter Pounders with cheese, two medium fries, and a 20-piece box of Chicken McNuggets, to boot.
Once again, this seems an unmistakable effort by McDonald's to grab business from the multi-person meals offered by Yum! Brands' Taco Bell, KFC, and Pizza Hut franchises, all of which which have long appeased diners by providing the option to purchase bulk-style boxes of their respective wares.
With all these menu changes, McDonald's is attempting to intelligently keep fickle consumers on their toes, and prevent them from getting bored with the same old fast food.
Of course, there's always the chance the company's efforts will overwhelm diners -- heck, it's almost overwhelming just reading about all its been up to lately -- but remember, McDonald's will be sure to present its changes on the menu in as simple a manner as possible, and can also rely on long-standing staples like the Big Mac, and its new variations of its old Quarter Pounder. This, in turn, should also please loyal customers who decide they just want more of the same.
In the end, then, I'm convinced this flexibility should afford McDonald's the ability to continue rewarding investors handsomely over the long run.
The article McDonald's Menu Blitz Is Heating Up the Fast-Food Wars originally appeared on Fool.com.Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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