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Renee Ann Butler is a freelance finance writer and former management consultant with over 15 years of experience in business management and strategy. She earned an MBA in financial management from Exeter in 2007 and has enjoyed a variety of international business experience, working primarily in... More
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Renee Ann Butler
  • McDonalds Drops Angus Burger, Looks To New Lineup 0 comments
    May 21, 2013 4:47 PM | about stocks: MCD

    McDonalds (NYSE:MCD) is discontinuing its Angus burgers. McDonalds has had the Angus burgers on its menu since 2009 but the fast food giant says that it is removing the premium burger "to make room for new and exciting choices," says McDonalds. "While these burgers will no longer be available in our restaurants, they may still play a future role on our menu."

    The problem appears to be less the success of the Angus burgers and more an issue related to a sluggish economy and changing consumer attitudes toward fast food. Amongst those customers who have remained consistent in patronizing fast food chains, many have turned toward more bargain priced menu items (i.e. dollar menus). And, many people are turning away from fast chains entirely.

    "In October 2012, the company reported its first monthly decline in same-store sales in nine years, and this week it said global sales fell again in April. The sales drops are in sharp contrast to the company's performance during the recession, when it posted growth despite a grim economic climate," writes the Wall Street Journal. "Fast-food customers have flocked to so-called dollar menus, downgrading from regular-priced deals to cheaper eats. Others are trading down from full-service restaurants to more premium-but still less expensive-fast food. Burgers like the Angus were targeting that latter market, responding to the rise of a new class of premium fast-food operators, and particularly specialist burger joints like Five Guys."

    In other words, McDonalds is trying to find a place between bargain menus and specialist fast food places. The answer appears to be in premium goods with higher margins -- just not the Angus burgers.

    "Rest assured," said McDonald Chief Executive Donald Thompson when asked about the Angus burgers in an April earnings call, "based upon our portfolio, we'll never remove anything from the menu that is a major driver of the business."

    So, while Angus burgers may not have a place at McDonalds for now, other premium priced goods certainly do -- such as salads, wraps, and coffees.

    However, while these menu items fit more into current health trends, McDonalds is straying from its original (and successful) strategy. "The menu at McDonald's has gotten so broad and so jumbled that nothing sells in large numbers," said Richard Adams, a former McDonald's franchisee who now consults for franchisees. "This business was built on simplicity, and that's kind of gone out of the window in the last decade" -- and maybe that's the problem.

    As McDonalds keeps trying new things and gauging public response, one thing is clear -- McDonalds has strayed significantly from its original simple offering of burgers and shakes. The company is getting so broad that its menu is rapidly becoming a series of trial and error offerings. Point in case, McDonalds recently debuted Fish McBites and a premium version of its McWrap chicken sandwich, but it also dropped its Chicken Selects and Fruit & Walnut Salad.

    McDonalds CEO Thompson has said repeatedly that the company has a series of new items in the pipeline for 2013, but only time will tell whether the company is finally on the right track or if it will be back to the drawing board -- again.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: MCD
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