McDonald’s Corp. (NYSE:MCDC) is in the news again. Thursday the company announced that by mid-2018 all Quarter Pounders would be made to order using fresh ground beef. This represents a huge operational change for the company – a change that took 2 years and a team of 40 to perfect, the company said.
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Snarky comments aside, McDonald’s has lost 500 million domestic transactions since 2012 to competitors (like Wendy’s) and the company is desperate to claw as many of them back as possible.
Breakfast has done well and the move to begin selling breakfast items all day has helped. The problem is the other 2/3 of the day – lunch and dinner where competition has been cleaning up at McDonald’s expense.
Burgers Then And Now
If you walk into a McDonald’s restaurant today and order a Quarter Pounder, the meat will have started out as a frozen patty, grilled earlier and placed in a warming bin. When you place your order, your sandwich is prepared using the already cooked patty.
By the middle of next year, your quarter pounder will be prepared totally from scratch using fresh ground beef, grilled on the spot. It’s worth noting that regular cheeseburgers and Big Macs will still be made from frozen patties. According to McDonald’s the key was figuring out how to make fresh sandwiches fast.
What About Wendy’s?
Key McDonald’s competitor, Wendy’s, has always used fresh beef and has been slamming the company in ads recently about McDonald’s use of frozen patties. It came to a head when McDonald’s announced the move to fresh beef with this tweet: “Today we've announced that by mid-2018, all Quarter Pounder burgers at the majority of our restaurants will be cooked with fresh beef.”
Then Wendy’s tweeted this response: “@McDonald’s So you’ll still use frozen beef in MOST of your burgers in ALL of your restaurants? Asking for a friend.” Ouch.
Carl’s Jr. And Hardees Weigh In
Privately held Carl’s Jr. and Hardees responded to McDonald’s latest move by going back to the basics. For Carl’s Jr. that means ditching ads featuring scantily clad models in favor of new ones touting the two companies’ positions as “pioneers of the great American burger.”
Noting that the sexy models ads created a lot of buzz, Carl’s Jr. executives admitted they did little to promote the fact the company works hard to make “better food than anyone in our space.”
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By The Numbers
The main question on Wall Street is: Will McDonald’s move to fresh matter? So far, according to Zack’s, steps McDonald’s has already taken including moving to the use of cage free eggs, real butter and antibiotic-free chickens has helped result in a 12.1% gain in share price over the past 6 months. This compares favorably with the Retail-Restaurants industry which has only shown a 2.1% gain over the same period.
This good news comes in the nick of time as competitors such as The Habit Restaurants (NASDAQ:HABTB), Shake Shack Inc. (NYSE:SHAKC) and the afore-mentioned Wendy’s have been taking larger and larger bites out of McDonald’s market share.