McDonald’s is Betting on Lower Cost Chicken as Economic Growth Stalls

McDonald’s is Betting on Lower Cost Chicken as Economic Growth Stalls

McDonald's is Betting on Lower Cost Chicken as Economic Growth Stalls


The newly appointed CEO of McDonald’s Corporation (NYSE:MCD)’s, Don Thompson, is betting on chicken items to revive the growth. He says snack items like Chicken McBites would help attract cash-conscious customers as chicken is a lot cheaper than beef right now.

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Fast food chains around the world are troubled by the decreasing consumer confidence in the US, Eurozone crisis and slowing growth rates in Asian countries. McDonald’s Corporation (NYSE:MCD)’s sales grew 3.3 percent in May, compared to 5.2 percent estimated by analysts. Company’s shares have fallen 12 percent in the first half of this year.

China is being targeted by various fast food chains. Yum! Brands, Inc. (NYSE:YUM) (the parent company of Kentucky fried Chicken) makes a large percentage of its sales from Chinese based stores. A slowdown, will likely hurt both MCD and Yum.

The new chicken items would also woo health conscious Americans. Chicken is perceived to be healthier, which could be a viable factor in increasing sales. For example, a six-piece order of Chicken McNuggets contains 280 calories, whereas a Big Mac has 550 calories. Last week, the company launched Spicy Chicken McBites in the U.S market, which has 410-calories.

Thompson has been with the company for over two decades. As COO, he introduced McCafe specialty coffee and smoothies in America in 2009. Thompson now plans to introduce McCafe drinks in Canada. He also initiated remodeling efforts and extended the restaurant hours.

During a consumer conference on May 30, Thompson said that new chicken items offer “tremendous opportunity” in this shaky economy. He said, “Our customers have given us permission to stretch our brand, so we are entering new categories with new products.”

Another thing supporting his decision is recent data from U.S. Department of Agriculture. It states that annual chicken consumption in the US will increase 1.7 percent to 82 pound per person by 2013. During the same period, beef consumption would fall 2.2 percent to 54.5 pounds per person.

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