McDonald's is shifting its focus to chicken and drinks to drive growth, but recent data on consumer spending suggests achieving this goal may be challenging. The company is relying on these sectors to enhance its growth phase, but data shows it faces intense competition from chains specializing in chicken and beverages. During its Investor Day in September, McDonald's revealed plans to increase its global market share by 1.5 percentage points in both chicken and drinks by 2030.
McDonald's CEO, Chris Kempczinski, emphasized the potential for growth in these sectors, citing the massive market sizes: $130 billion for chicken and $230 billion for drinks. He noted that McDonald's currently holds a 20% share in the chicken market and 10% in the drinks market. In contrast, the global beef market is valued at $50 billion, with McDonald's already holding a 40% share. Kempczinski believes McDonald's has greater opportunities for growth in chicken and drinks compared to the global beef market.
Recent data indicates that McDonald's may face significant challenges in attracting consumer spending away from specialized competitors in chicken and drinks. According to exclusive data from Consumer Edge, several restaurant chains that are gaining a larger share of McDonald's customers' spending specialize in these sectors. Chick-fil-A, a chicken chain, increased its share of limited-service restaurant spending by 0.58 percentage points in the third quarter compared to the same period last year.
Coffee chains are also capturing a larger share of McDonald's customers' spending. 7 Brew, a drive-thru coffee chain, saw a 0.4% increase, while Starbucks, Dutch Bros. Coffee, and Dunkin' also made the top 10 list of fastest-growing chains. Collectively, these coffee chains added 0.88 percentage points to their share of spending. Despite McDonald's maintaining its position as the largest limited-service restaurant chain by total customer spending, its market share declined compared to the previous year.
In contrast, Burger King, owned by Restaurant Brands International, saw a 0.24 percentage point increase, the largest among burger chains. Michael Gunther, senior vice president at Consumer Edge, noted that there is a fierce battle for a smaller share of restaurant spending, with consumers becoming more selective about their spending.
The spending data does not provide a complete picture of the competitive landscape for McDonald's in chicken and drinks, partly because the company does not closely track the products customers order on delivery platforms. Gunther added that if McDonald's can attract restaurant-goers with appealing options, its strategy may succeed. Despite a slowdown in sales, McDonald's executives reported signs of improvement towards the end of the third quarter.
McDonald's faces questions about the effectiveness of its chicken and drinks strategy, with some on Wall Street questioning how quickly the company can achieve results. Analyst Danilo Gargiulo of Bernstein noted that the company's beverage launches in the US have not generated sufficient sales to offset overall performance weakness. He also stated that McDonald's upcoming chicken initiative, which includes hand-breaded and grilled chicken, is further away than expected.
Key points
- McDonald's is focusing on chicken and drinks to drive growth amid fierce competition.
- The company faces challenges in attracting consumer spending away from specialized competitors.
- McDonald's strategy in chicken and drinks has raised questions about its effectiveness.
