UPDATE: Jan. 20, 2022: McDonald's will expand its McPlant offering to about 600 stores in the Dallas-Fort Worth and San Francisco Bay areas, according to CNBC. The plant-based burger rollout will begin Feb. 14, following a successful test at eight units last year.
Dive Brief:
- New analysis from BTIG analyst Peter Saleh forecasts that McDonald's will expand its Beyond Meat McPlant offering from eight locations to approximately 700 more restaurants in early 2022. The expansion is expected to be part of a six-to-eight week limited-time offer in February and March, according to BTIG's "conversations." McDonald's did not respond to a request for comment before press time.
- Based on franchisee checks, BTIG estimates that several of the eight locations are selling as many as 500 McPlant sandwiches a week, or roughly 70 per day. This is compared to BTIG's initial projections of about 20 to 25 McPlant sandwich sales a day.
- McDonald's signed a three-year global partnership with Beyond Meat in February as demand for plant-based meat grows. The global plant-based meat market is expected to expand by over 20% per year through 2028, according to a December report from ResearchandMarkets.com. Plant-based demand has accelerated during the COVID-19 pandemic.
Dive Insight:
The McPlant test is expected to inform the company's decision on a nationwide rollout, though that won't likely happen until 2023 because of McDonald's size, BTIG posits. That said, the product's early succcess is notable the McPlant test hasn't been supported by heavy advertising efforts, BTIG writes. Once McDonald's launches a marketing push around this product, the firm expects McPlant's sales to rise steadily for a time before eventually moderating.
Saleh reports the McPlant has performed exceptionally well in its current pilot locations and has experienced limited operational challenges. The operational piece is especially impressive as the industry is grappling with labor challenges that have caused some chains, including McDonald's, to trim their hours or close their dining rooms. The BTIG analysis indicates that a nationwide launch would be relatively seamless in McDonald's kitchens, which is an additional bonus as operators juggle more off-premise business as dine-in traffic returns.
Other analysts are also optimistic about the McPlant product's potential. Oppenheimer noted a speed of service consistent with other McDonald's products and was positive about its taste. The McPlant also seems to be performing well in the U.K. and Ireland, where nationwide rollouts are expected in Q1 2022.
During McDonald's most recent Q3 earnings call in late October, CEO Chris Kempczinski said there is evidence that the product is "filling an unmet need that certainly existed in the U.K. on their menu … Early results in the U.K. are very encouraging … Whether that is a broad-based acceptance in the U.S., I think, we’ll learn that over the next several quarters."
BTIG noted that McDonald's is taking market share from many of its quick-service peers, which isn't surprising given the chain's recent strong performance. The McPlant could garner more market share as consumers look for meat alternatives. McDonald's scale could also reduce the price difference between animal protein and analogue meat — a price gap which has likely deterred some trial in the category.
To navigate anticipated demand and supply chain challenges, McDonald's is likely building Beyond Meat inventory now, BTIG notes, pointing out that the Beyond Meat patties can stay frozen for up to 12 months.
Given the three-year agreement between Beyond Meat and McDonald's, a successful McPlant launch could extend the product development to other dayparts. As part of the partnership, Beyond is serving as McDonald's preferred supplier for the patty in the McPlant, and BTIG posits there could be opportunity to also exploring co-developing other plant-based items, such as chicken and sausage replacements.
