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McDonald’s New Mighty Wings Strategy: Break Even

There’s a chicken wing clearance sale going on at McDonald’s (MCD). This week the chain began promoting its Mighty Wings at a new price of $3 for five wings, or about 60¢ each, compared with the original price of $1 per wing. That’s a 40 percent discount. At this price, McDonald’s will either break even or take a slight loss on the product, according to Nick Setyan, vice president in charge of equity research at Wedbush Securities.

Mighty Wings will be sold at the discounted price “until supply runs out,” spokeswoman Lisa McComb wrote in an e-mail.

“They’ve paid for those wings. If they don’t sell it, they would have to eat the entire loss,” Setyan said in an e-mail. “It’s really the only sensible option at this point.” McDonald’s declined to comment on the profitability of the wings. Even so, Setyan estimates that the new price reduces operating margins on wings by about 10 percentage points.

Disappointing sales left the Golden Arches with roughly 10 million pounds of frozen wings—about 20 percent of what the chain purchased—at the end of 2013 after Mighty Wings launched nationally in September.

“The original price point wasn’t as competitive as it could have been,” according to McComb. Although some consumers found the wings too spicy, the recipe has not changed; there’s “just more awareness that they have a little kick to them.”

Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

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