It’s not that the company is failing anywhere – in fact, it reported a 10.3% jump in the fourth quarter for its U.S. stores but some of that growth was driven by hiking up menu prices and the “Farewell Tour” of its McRib sandwich, two things it can’t be pulling out of its hat forever.
“Inflation is still high and will continue to push up ingredient costs and erode the spending power of consumers. These things could potentially take the shine off the numbers on both the top and bottom lines and will require even more effort and imagination from McDonald’s to drive trade,” Neil Saunders, managing director of GlobalData, told RestaurantDive.
And that explains the added concentration and expansion of coffee, chicken, and burgers – products that account for nearly 70% of the chain’s revenue. Creating new variations of those items allows the company to develop more menu items without having to invest in more equipment or ingredients it doesn’t have in its inventory already.
Why did the chicken cross the road? To increase profits
Joe Erlinger, president of McDonald’s USA, said that chicken – which is almost twice the size of its beef category – will likely get much of the new love. He suggested a prime reason is that increasing the Golden Arches’ investment in chicken could take away business from chicken-only rivals.
“Chicken is at the heart of our growth category. It’s growing faster and represents a significant opportunity,” he said. It’s a year out, but McDonald’s is expected to premiere a new Crispy Chicken sandwich, a new menu item that has shown strong customer response in market tests. Another item that the company is testing overseas that could move stateside if it proves a hit is the Spicy Sriracha Chicken One wrap.
As for coffee, the beverage has been consistently boosting sales and margins for McD’s for a while now, and with its U.S. operations selling 500 million cups of coffee per year, why not shoot for the moon? Some of that is attributable to a change in the chain’s coffee recipe; some to a seasonal spike thanks to holiday-themed lattes.