McDonald’s Positions Offerings for Health Conscious Customers

McDonald’s (NYSE:MCD) has been trying to shift its image from being exclusively a fast food restaurant chain to one that also offers healthier options to its customers over the last several years as Americans are becoming more aware of what they consume. It has added menu items such as apple slices, low-fat milk, salads, yogurt and bottled water to appeal to more health conscience visitors and provides nutritional information for all of its food. This is a smart move for McDonald’s as several studies outline the risk of obesity. Even the First Lady, Michele Obama, is promoting healthy lifestyles for children with her Let’s Move campaign. McDonald’s competes with Wendy’s (NYSE:WEN), Subway, Burger King and Yum! Brands (NYSE:YUM). In the specialty coffee market, it competes with Starbucks (NASDAQ:SBUX).

We currently maintain a $85 price estimate for McDonald’s stock, which is roughly in line with the market price.

Customers Concerned About Calorie Intake

According to a research report by Mintel Research Consultancy, consumers are becoming more concerned with their unhealthy eating habits. This report states that 37% of consumers surveyed said they have been limiting or avoiding calories in the past six months, 20% have been limiting or avoiding fats and oils and 17% reported cutting back on products with sugar or added sugar. ^[1] According to the data from Department of Health and Mental Hygiene, six in every ten adults in New York are considered overweight. ^[2]

This clearly presents a serious health issue given the negative consequences like high blood pressure and obesity that can lead to several more serious health conditions. According to Let’s Move, childhood obesity has tripled and one in three American children are overweight or obese. ^[3]

McDonald’s Wants to Appeal to Health Conscious Segment

McDonald’s has taken various steps to offer healthier options to its customers. It plans to reduce the size of french fries in each happy meal from 2.4 ounces to 1.1 ounces. The meals will also include a serving of apple slices, carrots, raisins, pineapple slices or mandarin oranges. In some Canadian cities, it plans to offer low-fat strawberry yogurt and smaller portions of french fries. In the U.S. and U.K., McDonald’s provides calorie information to curb rising national obesity rates. This is required as per government regulations.

We believe McDonald’s is moving in the right direction with its initiatives. It recently earmarked $1-billion to renovate all its Canadian restaurants. By 2015, it expects to remodel its 14,000 stores in America and is offering healthier options to keep up with the increasing food awareness among its customers. This will help its brand perception and ensure that customers continue coming back to the golden arches.

See our full analysis  for McDonald’s stock here

1. See: Consumers More Concerned with Fat, Calorie Intake than High-Fructose Corn Syrup [↩]
2. See: Fast Food Aficionados are Becoming More Health Conscious, Starting to Count Calorie Intake [↩]
3. Let’s Move [↩]