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McDonald's plots plant-based products as part of a new growth strategy

The company is planning a new loyalty program, stronger marketing and more chicken products as part of a broad, global growth plan presented Monday.
Photograph courtesy of McDonald's

McDonald’s is developing a new format of plant-based products, called “McPlant,” that could start testing in some global markets as soon as next year, company executives told investors on Monday.

“This is an ongoing consumer trend,” CEO Chris Kempczinski said. “It’s not a matter of if we will get into plant-based, it’s a matter of when.”

The McPlant, which could feature burgers, chicken sandwiches or breakfast items, was announced as part of a broad-based growth strategy, called “Accelerating the Arches,” that will dictate the company’s operations in the coming years.

The strategy features a major shift in marketing, a bigger focus on digital—including a loyalty program set to start testing in Phoenix later this year—as well as a refocus on its core products, especially chicken. The company is planning to start selling its Crispy Chicken Sandwich in the U.S. in early 2021.

The strategy was presented one year after Kempczinski took over as CEO. It succeeds the company’s Velocity Growth Plan, which Kempczinski developed while Steve Easterbrook led the chain. McDonald’s said Monday that plan helped generate an additional $12 billion in system sales over five years.

At the same time, the new plan was presented in a very different time, one marked by a coronavirus pandemic executives believe will have long-lasting impacts on the chain’s global customer base.

“The needs of our customers coming through the pandemic are going to be different than they were coming in,” Kempczinski said. “The restaurant experience we offer must change to meet those evolving needs.”

Plant-based platform

The biggest surprise of the event was the revelation of the “McPlant,” a plant-based menu platform developed exclusively for the Chicago-based company.

Details on the plant-based platform were not available, but it notably does not carry the name of one of the two biggest players in the emerging market for plant-based meat products, Impossible Foods and Beyond Meat.

Ian Borden, who heads McDonald’s international markets, said during the investor presentation that the burger was created “exclusively” for McDonald’s. He suggested some markets could start testing the product as soon as next year. “When customers are ready for it, we’ll be ready for them,” Borden said.

Kempczinski said the platform will be flexible. Individual global markets could dictate what products get introduced and when. He called it a “global, core menu optional item.”

“A market can pull that down if they think there is customer demand,” he said. “The pace will be dictated by customer demand and how quickly customers look for McDonald’s to offer that product.”

More chicken

But McDonald’s is first focusing on more chicken products. That includes the Crispy Chicken Sandwich, the product that has been under development for several months and is expected to be the chain’s long-awaited competitor to rival Chick-fil-A.

The Crispy Chicken Sandwich features a fried chicken filet on a potato roll with pickles and butter. The company has been testing it since last year. “Our customers loved it in test,” said Joe Erlinger, president of McDonald’s U.S., noting that the product has been “exceeding expectations on key metrics.”

But that sandwich won’t be the only thing. Erlinger noted the company plans to build off of its existing chicken platforms, including its McChicken Sandwich and its Chicken McNuggets, to take advantage of a growing market for chicken.

“Developing a reputation for great chicken represents one of our highest aspirations,” Erlinger said.

“We’re not one chicken sandwich away from building our credibility in this area,” he added. “We know we need to continue to build equity and credibility, and that’s going to start with the launch of the Crispy Chicken Sandwich.”

A more digital McDonald’s

The burger giant is also planning to start testing a MyMcDonalds Rewards loyalty program in Phoenix in the coming weeks before an anticipated national launch some time in 2021, executives said.

The loyalty program will be the centerpiece of a digital growth engine called MyMcDonalds that features all of its digital ordering systems, including its drive-thru menu boards, mobile app and kiosks.

Digital orders are already significant for McDonald’s—20% of sales are expected to come through digital and delivery formats this year in the company’s six biggest markets, Chief Digital Customer Engagement Officer Lucy Brady said. That is higher than usual for a quick-service restaurant chain.

Loyalty programs have become increasingly important in the restaurant space, as companies like Starbucks and Domino’s have demonstrated. McDonald’s has been working on its program for some time.

Brady said that MyMcDonalds Rewards will be “an earn-and-burn” program where customers will be able to earn points for every dollar they spend.

More breakfast

Not mentioned on Monday was All Day Breakfast, the U.S. program that helped the chain recover sales in 2015 that was suspended after the pandemic and has yet to return.

Yet the company did note that same-store sales in the morning have been up both in September and October—a surprise given general challenges with the daypart and new competition from Wendy’s.

And executives also said that loyalty and coffee should help build that daypart in the coming years.

They also noted that coffee will be a major focus of the chain in the the future. McDonald’s is already the No. 2 coffee brand in the world, based on number of servings. “We’re excited about coffee,” Borden said. “People in every culture love coffee. Coffee drives guest counts. It’s profitable. It has higher margins while also driving food sales.”

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