By Heather Haddon
McDonald's Corp. is making changes to its menu and restaurant
operations as the coronavirus pandemic persists, including an
emphasis on to-go orders and new "McPlant" vegetarian items.
The burger company said Monday that it would test a slate of new
plant-based products in some markets next year. McDonald's ran a
pilot program earlier this year in Canada to sell patties made by
Beyond Meat Inc., a leader in the market to sell new plant-based
products that closely mimic meat.
Beyond Meat said it developed a patty for the McPlant line
together with McDonald's. McDonald's, which said the McPlant line
could include imitation burgers, chicken and breakfast foods,
declined to discuss what companies would supply the new items or
what ingredients they would include.
McDonald's shares fell 1.5% Monday to $213, while Beyond Meat's
shares fell 4.1% to $150.50.
After markets closed, Beyond Meat reported a $19.3 million
quarterly loss due to a pandemic-driven slowdown in restaurant
sales. Its shares dropped 26% in after-hours trading.
Plant-based meat substitutes have made a splash in the past year
as they moved onto more fast-food menus and retail shelves.
Imitation meats made by Beyond Meat, Impossible Foods Inc. and
other competitors claim to taste and cook more like the genuine
article than traditional veggie burgers.
Many chains have cut deals with plant-based meat manufacturers
last year, including Burger King's partnership with Impossible
Foods and Dunkin' Brands Group Inc.'s deal with Beyond Meat. Beyond
Meat and Impossible Foods have both added manufacturing capacity to
meet rising demand for their products.
McDonald's Chief Executive Chris Kempczinski said local demand
would determine where and when to introduce "McPlant" items. "It's
not a matter of if McDonald's gets into plant-based, it's when," he
said during an investor event.
Beyond Meat CEO Ethan Brown said his company's relationship with
McDonald's is strong. "We're working closely with them on a number
of matters," Mr. Brown said.
"We worked hard to develop the burger that was in the PLT and
will be in the McPlant," he said, referring to the "plant, lettuce
and tomato" sandwich the two companies served for a time this year
in Canada.
As a result of the pandemic, Mr. Kempczinski said it is testing
automated order taking, dedicated drive-through lanes for online
orders and a restaurant design with no dining room. Rivals are also
investing in to-go operations. Chipotle Mexican Grill Inc. this
year built dozens of drive-through lanes for online orders.
McDonald's said it is also exploring its own delivery service in
some markets with high demand, including Australia and Germany.
"The restaurant experience we offer must evolve," Mr.
Kempczinski said during an investor event Monday.
The company said Monday that global same-store sales fell 2.2%
during its third quarter from a year earlier, a slightly better
result than analysts had expected and a sizable improvement from a
24% drop in the second quarter. Sales improved as countries allowed
restaurants to reopen during the summer and autumn after initial
lockdowns, McDonald's said.
Rising numbers of coronavirus cases are closing dining rooms in
some places again. McDonald's said government restrictions on
restaurant hours, dine-in capacity and dining rooms since September
are hurting its operations, particularly in markets outside the
U.S. such as France, Germany, Canada and the U.K.
While restaurants have been hit hard by the pandemic,
well-capitalized chains are in many cases performing better than
independent restaurants. Companies with drive-through and delivery,
including McDonald's, have had an advantage.
McDonald's reported a 4.6% year-over-year increase in same-store
sales in the U.S. for its latest quarter. It said bigger orders and
dinner business helped overcome lower total customer tallies.
Drive-through service and a promotional partnership with the
musician Travis Scott drew customers, McDonald's said.
Burger King, owned by Restaurant Brands International Inc.,
reported a 3.2% drop year-over-year for its U.S. same-store sales
for the quarter ended Sept. 30.
McDonald's recently set a plan for closed dining rooms in the
U.S. to reopen if cases of Covid-19, the illness caused by the new
coronavirus, fall locally over time. McDonald's said it would focus
on improving core menu items such as its burgers, as consumers have
gravitated toward familiar food during the pandemic. McDonald's had
introduced customizable burgers and other higher-end options in
recent years before removing some of those items to simplify its
operations.
"It's a clear reminder that each product must earn its place on
our menu, " said Ian Borden, McDonald's president,
international.
One item McDonald's does plan to add is a crispy chicken
sandwich on a toasted potato roll, due to arrive in the U.S. early
next year. Competitors, particularly Popeyes Louisiana Kitchen,
have notched big sales increases through chicken sandwiches.
McDonald's also said it would introduce a loyalty program, starting
with tests in the Phoenix area in coming weeks. Starbucks Corp. and
other big chains have run loyalty programs for years and attracted
millions of regular users.
For its 2021 and 2022 fiscal years, McDonald's said it expects
sales growth in the mid-single-digit percentages, similar to 2019
levels. It expects capital expenditures of roughly $2.3 billion,
about half going to new restaurants. The company expects much of
its 2021 spending to go to hundreds of new restaurants,
particularly in China and other global markets.
Revenue for the quarter totaled $5.4 billion, in line with
expectations from analysts polled by FactSet. Profit rose to $1.8
billion from $1.6 billion a year earlier. Profit was aided by the
sale of part of its stake in its Japanese business. Analysts had
expected profit of $1.4 billion for the quarter.
For its third quarter ended Sept. 30, McDonald's reported
earnings per share adjusted for one-time items of $2.22, up 5% from
the prior year. Analysts had expected $1.91.
Jacob Bunge contributed to this article.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
November 09, 2020 18:22 ET (23:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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