McDonald’s Next Move Towards More Natural Food
McDonald’s (NYSE:MCD) has been working aggressively to modify its menu items to make them more healthy and preservative free. These menu innovations have worked in the company’s favor and its Q1 2017 performance was superior to its peers, indicating that the company is developing a competitive edge. Continuing its efforts to eliminate artificial preservatives from its products, McDonald’s recently announced that its vanilla soft serve is now free of artificial flavors, colors, or preservatives. This change will impact 60% of the desserts at McDonald’s. This comes after its competitors such as Dunkin’ Brands and Chipotle Mexican Grill also announced that they are moving towards removing artificial ingredients from their products. As restaurants gear up for the upcoming summer, they are looking to attract the millennial population with food items which are natural and healthier. McDonald’s strategy to shift towards more fresh ingredients is working and we believe this change will enable the company to continue its sales growth trajectory.
Consumers Prefer Tastier Healthy Food
According to Technomic’s, 2016 Healthy Eating Consumer Trend Report, 37% of consumers are more likely to visit restaurants that offer healthy items. As consumer preferences shift towards healthier food choices, the industry is providing options which are tasty along with being healthy. This is driving more customers to decide for the healthier option and one-third of the customers being surveyed mentioned that they are choosing healthier options more frequently compared to what they did in 2014. We believe as most fast food restaurants move away from artificial ingredients, this will eventually become a necessity rather than a unique selling point for a restaurant. McDonald’s efforts to remove preservatives from its products ensure that it is in line with its peers in these initiatives and does not lag behind in offering healthy products. Further, customers are willing to pay extra for a healthy menu item and this should drive the average ticket size at McDonald’s which, in turn, can impact the comparable sales positively.
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McDonald’s transformation from a “junk” food destination to a restaurant with healthy options is helping the company build a competitive edge. We believe as the fast food giant continues its efforts to make its food products more natural and preservative free, these efforts can drive growth for the company in the long term.
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