Why a plant-based McDonald’s burger is no slam dunk

Even as competitors push meat-free burgers, the product might not be ready for the giant’s domestic market, says RB’s The Bottom Line.
Photograph courtesy of McDonald's Corp.

the bottom line

Analysts and others have been wondering when McDonald’s would add a plant-based burger in the U.S. almost from the moment that Burger King announced its test of the Impossible Whopper back in March.

The questions have come faster more recently, including last week, when analysts asked about McDonald’s on the first earnings call for plant-based meat maker Beyond Meat—where former McDonald’s CEO Don Thompson is a board member.

McDonald’s has a plant-based burger in Germany called the Big Vegan TS. According to Reuters, McDonald’s is in talks with Nestle, the company that makes the patties for that burger, on expanding their partnership. And Nestle, according to Reuters, wants to bring a plant-based burger to the U.S.

A McDonald’s vegetarian burger in the U.S. would be a massive win for consumers who have been pushing the idea for years, placing a plant-based entree item squarely into the mainstream. It would also be a big victory for whatever supplier gets the contract.

Rivals appear to be generating strong early sales with their plant-based offerings, particularly Burger King.

But there are plenty of reasons why McDonald’s is taking this wait-and-see approach to the plant-based burger market.

For one thing, there is the practical matter of grill space.

To start producing a plant-based burger, McDonald’s locations would likely have to reserve a grill specifically for that product. That means less space for existing burgers and breakfast products.

While plant-based burgers might generate sales in the short term, it remains to be seen whether this is a long-term sales strategy. Devoting grill space to something that might be a flash in the pan is a major risk.

“We’ve got to make sure the consumer trend is sustaining,” McDonald’s CEO Steve Easterbrook told analysts last month, according to a transcript on financial services site Sentieo.

It’s a legitimate concern. Though products from Impossible Foods and Beyond Meat have been praised as higher-quality plant-based burger options than many predecessors, there is a long history of chains pushing vegetarian or healthy options, only to shift back to their old habits.

In 2013, for instance, Burger King generated strong sales with its well-reviewed, healthier Satisfries, only to pull the product off its menu less than a year later after consumers went for the traditional fries.

Another concern for McDonald’s is complexity. The chain is taking items off its menu, not adding them. It recently decided to reduce its All Day Breakfast menu, and it removed its semicustomizable Signature Crafted Recipes sandwiches.

The company hopes the reduction can improve operations and shrink service times, especially in the drive-thru. McDonald’s believes its speed is key in reversing traffic declines.

“You’re going to introduce another level of complexity in the kitchen,” Easterbrook said.

Price is another concern.

McDonald’s already has a pricing problem. As the company has pushed lower-cost items, many franchisees have raised the prices for the chain’s more premium items. Several higher-end sandwiches already cost more than $5 in many markets.

A vegetarian McDonald’s burger would likely cost at least that much. While consumers might pay those prices now, they might not continue to over time, and then the company risked its speed and grill space for a product that faded.

One final point: Just because customers say they want something doesn’t mean McDonald’s should actually give it to them. Customers most likely to order vegetarian items probably aren’t going to the chain, anyway.

For a vegetarian item to work, it has to become important to the chain’s existing customers, or it has to lure new customers to the company with relative frequency. That’s easier said than done.

None of this is to say McDonald’s won’t offer a plant-based burger at some point. If the plant-based trend proves to be more than a fad, the company could jump on board. And with some of the company’s existing suppliers getting on board, veggie burger manufacturing capacity probably isn’t a problem.

For now, however, McDonald’s seems content with letting smaller rivals test the market.

Said Easterbrook: “It’s complicated. But if the upside is enough, you’ve got to find a way of handling the complexity.”

“So I think we’re at the stage now of really trying to get a really good read on the consumer, understanding what it will do to the day-to-day restaurant operation, and then working out whether that kind of contradiction is worth embracing. But there’s no doubt it’s interesting.”

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