Dive Brief:

• McDonald's announced Tuesday that the chain is launching Spicy Chicken McNuggets on Sept. 16 for a limited time at U.S. restaurants. The company will also roll out Mighty Hot Sauce and a Chips Ahoy McFlurry on the same date.
• "This is the first time we've introduced a new flavor of our classic Chicken McNuggets in the U.S. since they came to menus in 1983," Linda VanGosen, vice president of menu innovation at McDonald's, said in the release. "As our customers have been asking for Spicy McNuggets for some time now, we couldn't think of a better time to bring them to our menus."
• Wendy's tweeted "Must have scraped up all of BKs leftovers and slapped mcprice on it" in response to McDonald's announcement, displaying the comedic snark the chain has become known for on social media. Wendy's put its spicy nuggets back on the menu in 2019 in response to diner demand, a move that has been boosting its same-store sales. 

Dive Insight:

The jabs that are already flying on Twitter about McDonald's new Spicy Chicken McNuggets echo the "chicken sandwich wars" of last summer, when Popeyes' new chicken sandwich sparked an arms race for the menu item among QSR chains. 

Following Popeyes' launch, McDonald's created two new chicken sandwiches in response to franchisee demand for a product that could better compete with rival Chick-fil-A's offerings. The chicken chain's strong brand halo and rapid sales growth despite being closed on Sundays make it a viable threat, so investing in the development of competitive chicken sandwich offerings makes sense.

It's possible that McDonald's creation of a spicy chicken nugget signals that the mega chain now has Wendy's in its crosshairs as a competitor to quash. 

"Customer response exceeded our expectations, thanks to our powerful social media voice that had customers craving for this product. This promotion increased our average check and significantly changed our incoming customer count trends when we began this promotion," Wendy's CEO Todd Penegor told investors on the company's Q3 2019 earnings call following the relaunch of the menu item in August of that year. "Supporting the launch of Spicy Nuggets for promotions through our mobile app, this led to an increased awareness of our digital platforms as we doubled our number of mobile ordering transactions during the promotion."

At that time, the chain's same-store sales increased 4.4% in North America.

Spicy chicken nuggets aren't the only menu innovation that has been driving success so much that it could threaten McDonald's business, however. Wendy's breakfast has also been making gains since the menu's launch in March — in Q2 2020, the daypart made up 8% of U.S. systemwide sales, translating to about $192 million out of $2.4 billion. The QSR plans to make an incremental investment of up to $15 million in breakfast. 

"We feel very confident about breakfast into the future with the start we've had, especially in the environment that we're seeing today with the breakfast daypart being the hardest hit through the whole pandemic," Penegor said. 

McDonald's breakfast, on the other hand, has suffered due to a decline in commuters amid the novel coronavirus pandemic. At the beginning of the outbreak, the chain nixed its all-day breakfast menu to make it easier for restaurants to operate as workforce levels ebbed and flowed. The daypart had been struggling for years prior to the pandemic, however. CEO Chris Kempczinski said on the company's Q2 2020 earnings call that McDonald's will put more investment and marketing behind breakfast when the health crisis eases, and that the chain has been accumulating more share in the category.

It's possible that McDonald's spicy nugget innovation will help the chain better compete with Wendy's because it's the first time McDonald's has introduced a new flavor of the menu item since their debut in 1983. But Wendy's breakfast growth and increasing digital prowess make it a more challenging competitor than it was at the start of the year.