McDonald's' New Burger Is Another Reason to Love It 30 comments
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McDonald's (MCD) is introducing its first new burger in a long time, called "Angus Third Pounders" .
Will it work? Based on early tests in NY and other test markets, yes it will. The cost of the product will be $4, which is not unreasonable at all for a burger. McDonald's is also going in the right direction. Going up the price ladder is easier than coming down.
Look at Starbucks (SBUX), the company cannot shake the "expensive" label, no matter how hard it tries, because for so long it was proud of it because to the company it signaled "quality". Now the consumer has changed and is looking for value and McDonald's is printing profits as they come in the door.
I think people are really underestimating the potential of the new McDonald's burger. Think about it. Most people like a good burger and $4 is still dramatically cheaper than the $7 -$9 you pay in most chain restaurants for one. Because of that, I am of the opinion that a large swath of current customers are going to give it a spin. Mom and dad can enjoy one while the little kids enjoy the Happy Meal they always want.
From a consumer perspective, this is the perfect thing for them to be doing now. They have expanded the coffee customer base, expanded the healthy offerings, and now they are expanding the base of people who want a burger but also want more than the current cheeseburger fare. Unlike other past unsuccessful roll-outs like when they ventured into pizza, this is perfectly in keeping with what people go to McDonald's for in the first place. This is going to be big...
Disclosure: Long MCD
Will it work? Based on early tests in NY and other test markets, yes it will. The cost of the product will be $4, which is not unreasonable at all for a burger. McDonald's is also going in the right direction. Going up the price ladder is easier than coming down.
Look at Starbucks (SBUX), the company cannot shake the "expensive" label, no matter how hard it tries, because for so long it was proud of it because to the company it signaled "quality". Now the consumer has changed and is looking for value and McDonald's is printing profits as they come in the door.
I think people are really underestimating the potential of the new McDonald's burger. Think about it. Most people like a good burger and $4 is still dramatically cheaper than the $7 -$9 you pay in most chain restaurants for one. Because of that, I am of the opinion that a large swath of current customers are going to give it a spin. Mom and dad can enjoy one while the little kids enjoy the Happy Meal they always want.
From a consumer perspective, this is the perfect thing for them to be doing now. They have expanded the coffee customer base, expanded the healthy offerings, and now they are expanding the base of people who want a burger but also want more than the current cheeseburger fare. Unlike other past unsuccessful roll-outs like when they ventured into pizza, this is perfectly in keeping with what people go to McDonald's for in the first place. This is going to be big...
Disclosure: Long MCD
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This article has 30 comments:
The resister will be ringing good and the earning will be helped.
Macdonald is a buy for long term.
years. Any more news on DOW?
I visited 3 different McDonalds (for a cup of American joe). I couldn't believe how busy every store was selling food. Last September in Rome and Brussels, I found it was the same story. People waiting in line. McDonalds is is a Big Hit in Europe!
On Jul 04 08:20 AM kaybee1950 wrote:
> I recently returned from Vienna, spending a week of leasure in June.
>
> I visited 3 different McDonalds (for a cup of American joe). I couldn't
> believe how busy every store was selling food. Last September in
> Rome and Brussels, I found it was the same story. People waiting
> in line. McDonalds is is a Big Hit in Europe!
no wonder asian people don't drink coffee like we do.
one plus...the chinese people love the fries and catsup....i've even seen them eating fries with ice cream
On Jul 04 08:20 AM kaybee1950 wrote:
> I recently returned from Vienna, spending a week of leasure in June.
>
> I visited 3 different McDonalds (for a cup of American joe). I couldn't
> believe how busy every store was selling food. Last September in
> Rome and Brussels, I found it was the same story. People waiting
> in line. McDonalds is is a Big Hit in Europe!
Still wish In-N-Out was public.
On Jul 03 09:58 AM pftittl wrote:
> We have had that burger in California as a market test for some time
> now and it's an excellent product--much better than the regular McDonald's
> fare. What they are doing is stealing an idea from Carl's Jr., which
> long ago came out with a "$6 burger" that initially cost about $3.
How can anyone beat that?
On Jul 04 03:05 PM Harley's favorites. wrote:
> Any change, improvement, or addition to the menu that the "ordinary"
> person enjoys is always good. I just have another concern! Being
> in the cattle business and also a MickyD shareholder I'm wondering
> if using the term "Angus" is really such a big plus point, or need,
> unless that is the only kind of beef purchased and used here. There
> are Herford, Charlois, Brangus, and on and on for quite a few varieties/breeds.
> Couldn't we advertise and sell "The American" burger, or "The Perfect"
> burger? Thinking of the old phrase, "The way to a man's heart..."
> might work for "The way to the world's heart...."
I see your point, but perhaps the consumer will see this as a "cheap treat"....certainly cheaper than a filet mignon at a white tablecloth eatery.
On Jul 05 10:55 AM Freya wrote:
> Lets see: Double cheeseburger and fries = $2, Angus Burger = $4.
>
>
> Toss in a deep Recession. You people are kidding me , right?
Your equation would be:
Current customer - $2 ChBgr = $2 ChBgr
New Customer - $4 Angus Burger (higher margin) plus incremental revenue from the kiddies (current margins)
McDs will increase Rev and keep margins expanding or steady by slightly fragmenting the Chili's, Applebee's market and the occasional stray from In-N-Out, Five Guys, etc. I wonder what their unit volume estimates are for these 1/3 LBers?
I haven't tried one but as long as it is comparable it is great timing.
On Jul 05 10:55 AM Freya wrote:
> Lets see: Double cheeseburger and fries = $2, Angus Burger = $4.
>
>
> Toss in a deep Recession. You people are kidding me , right?
I agree with options girl-Public thinks " angus " denotes quality .
Better yet -go to Kroger , Buy 1 lb LOW fat ground quality beef , Grill it on your own Gas grill -Grill some onions too , with a touch of olive oil , grill med-rare . A real treat that is Actually healthy +tasty , cost effective too . MCD cannot even make good coffee , Burger kings is Much better
I screamed with laughter re the Angus burger . You are Soo correct !
americans wonder why they have cardiovascular disease out the ying-yang ? Go -figure !
- 2bn cash, 10.5bn debt (OUCH!)
- Book has heavy exposure to commercial real estate both foreign and domestic (DOUBLE ANGUS OUCH!)
- Dollar will strengthen in a deflationary crash as debt destruction kills the money supply faster than the fed can reflate. Its the multiplier effect in reverse. This means that repatriated earnings will plummet when translated into stronger dollars.
- Payout ratio on the modest dividend (3.5% is about what you can currently get on a 5 year FDIC insured CD) is 46% which is getting up there. Any reduction in profit could easily cause MCD to cut the dividend.
From a TA perspective the MCD chart is showing unmistakable signs of topping. The truth is that while MCD is a good company, its also broadly known to be a good company. That means that the MCD trade is very crowded indeed with no place to go but down over the next 24 months.
I agree that debt destruction is a real issue. I am walking away from my debt. I can't see paying banks that lend at 30 percent when they borrow at 1/2 percent. They are legalized loan sharks.
On Jul 06 06:46 AM Freya wrote:
> Gary A: I have a variable Home equity loan at 2.49% annually. I am
> going to get a Fixed Rate shortly.
>
> I plan to Buy a few Closed end Funds with monthly distributions which
> are double my monthly payments or maybe something like the Trust
> PFDs of BAC which pay around 9% to pay off the Loan plus some.<br/>
>
> What's good for the Goose is good for the Gander.
MCD has introduced premium burgers before and they flopped. Think McDLT and ArcheDeluxe. While new burger product introduction is not a frequent event, history will show that the track record is not good especially on a premium beef burger.
You also seem to suggest that the best tasting burger wins which doesn't appear to be the case. When did MCD ever offer the best tasting burger relative to Burger King and Big Boy in the early days or In-N-Out nowadays? If offering the better burger wins, it would be Burger King dominating the QSR industry today.