McDonald’s New CEO Focuses on Chicken Amid Shaky Economy

McDonald’s Corp. (MCD)’s new chief executive officer is playing chicken with the menu.

As Don Thompson, 49, steps into the CEO role at the world’s largest restaurant chain, customers may see more new chicken items instead of beef. Thompson is pulling from McDonald’s 160-item recipe book, which includes bone-in chicken wings and cashew teriyaki salads with chicken, to sell new food and attract cash-conscious consumers amid a shaky global economy. It’s a “tremendous opportunity,” Thompson said during a consumer conference on May 30.

“Some great examples include our large wrap in Europe and snack items like Chicken McBites,” he said. “Our customers have given us permission to stretch our brand, so we are entering new categories with new products.”

McDonald’s is looking to draw budget-minded Americans with chicken items, which can be priced lower than other proteins, according to Bryan Elliott, an analyst at Raymond James & Associates in St. Petersburg, Florida. “The consumer is expressing some recent signs of distress” and chicken costs are “cheap relative to beef right now by a lot,” he said.

McDonald’s, along with other fast-food operators, is facing government austerity programs in Europe, declining consumer confidence in the U.S. and slowing economic growth in Asia. Sales at McDonald’s stores open at least 13 months rose 3.3 percent worldwide in May, trailing analysts’ estimates for growth of 5.2 percent.

Photographer: David Paul Morris/Bloomberg

McDonald's Corp. chicken selects in San Francisco. Close

McDonald's Corp. chicken selects in San Francisco.

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Photographer: David Paul Morris/Bloomberg

McDonald's Corp. chicken selects in San Francisco.

McDonald’s fell 0.5 percent to $88.08 at the close in New York. The company’s shares have slumped 12 percent this year, compared with a 3 percent gain for the Bloomberg U.S. Quick-Service Restaurant Index.

Healthier Perception

Chicken also is “perceived to be healthier,” Elliott said. “That could certainly be a factor in their thinking.”

A Big Mac has 550 calories, while a six-piece order of Chicken McNuggets has 280 calories.

Last week, the Oak Brook, Illinois-based company began selling 410-calorie Spicy Chicken McBites in the U.S. At the same time, Americans are expected to eat more poultry. Chicken consumption in the U.S. will increase 1.7 percent to 82 pounds (37 kilograms) a person in 2013, while beef consumption may decline 2.2 percent next year to 54.5 pounds, according to data from the U.S. Department of Agriculture.

Thompson, who introduced Americans to McCafe specialty coffees and smoothies, started at McDonald’s 22 years ago as an electrical engineer. He’s managed regions including Denver, San Diego and the Midwest, and was president of McDonald’s USA from 2006 to 2010, before being named chief operating officer. After Jim Skinner, the previous CEO, Thompson was the company’s highest paid executive last year -- making $4.07 million, including an $829,000 salary.

Strategic Plans

“I’ve kind of led a lot of strategic planning and initiatives,” Thompson said during a telephone interview earlier this year. He brought McCafe drinks from Australia to the U.S. in 2009 and is now introducing them in Canada. As COO, he also led remodeling efforts, added double-lane drive-throughs to stores and extended restaurant hours -- about 40 percent of U.S. locations are open 24 hours a day.

The chain has introduced snack wraps, 290-calorie oatmeal and McCafe fruit smoothies during the past five years to appeal to more health-conscious consumers and draw afternoon traffic. McDonald’s is also promoting chocolate-dipped ice cream cones and s’mores pies for a limited time in the U.S. and may test new dessert items this year, Phillip Juhan, an analyst at BMO Capital Markets in Atlanta, said in an interview.

“Dessert is going to be an area of opportunity for them and one that they’re going to push” at U.S. stores, he said.

Recipe Book

McDonald’s recipe book “can be a core strength, but it can also be a detriment if you get to be too broad with your menu,” Darren Tristano, executive vice president at Chicago-based researcher Technomic Inc., said in an interview. They have to make sure that new food can be made quickly at thousands of locations, he said.

There is no change from McDonald’s strategy -- the company’s so-called Plan to Win, Thompson said in the interview.

“A transition in leadership is not a change in strategy at McDonald’s,” Thompson said.

McDonald’s has more than 33,500 stores worldwide, of which about 80 percent are franchised.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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