McDonald’s Wins Market Share With New, Fresher Menu Items

McDonald’s Corporation (NYSE:MCD) has added two breakfast focused items, McCafe Cherry Berry Chiller and Blueberry Banana Nut Oatmeal, to its U.S. menu. ^[1] Adding new menu items has certainly helped McDonald’s keep its menu fresh and maintain its dominance in the breakfast segment. Last year, the restaurant chain added products such as Fruit & Mango Oatmeal, Mango Pineapple Smoothies, and Peppermint Mocha. McDonald’s competes with Yum! Brands (NYSE:YUM), Subway, Starbucks (NASDAQ:SBUX), Wendy’s (NYSE:WEN), Chipotle Mexican Grill (NYSE:CMG), among many others.

We have a Trefis price estimate of $98 for McDonald’s, which is about 7% above the current market price.

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More Than Breakfast

McCafe Cherry Berry Chiller is 100% fruit juice while the Blueberry Banana Nut Oatmeal is a mix of blueberries, walnuts, and a hint of banana. Apart from their obvious breakfast appeal, the new items are based on fruit products that have a feel-good factor and are part of the company’s long-term strategy of providing consumers more options of healthier products. The strategy of regularly adding new menu items suited to the tastes of American consumers is just one of the reasons why the restaurant chain has consistently performed well in the U.S.

Focus on breakfast items has helped McDonald’s attract a greater number of footfalls to its outlets. This has helped the company maintain profitability, at a time when food and labor costs are soaring, since fixed costs (such as occupancy costs) are spread over a greater revenue base.

The American success has encouraged McDonald’s to export its breakfast model to international locations. In China, where it plans to add 250 new restaurants by the end of the year, a muffin and coffee are sold for less than $1. McDonald’s also offers warm, American-style breakfasts in this region. ^[2] Currently, around 8%-10% of its total sales in China are contributed by breakfast. McDonald’s expects this figure to double in the coming years as the company continues to focus more on the breakfast segment.

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1. McDonald’s Debuts New Breakfast And McCafe Menu Options Inspired By Seasonal Fruit, Available Until August, ibtimes.com [↩]
2. McDonald’s China CEO on bringing McMuffins to the masses, cnn.com, May 10, 2012 [↩]