Dive Brief:

• Research firm Stephens predicts that McDonald's will run into a supply chain squeeze that will push back its crispy chicken sandwich launch to mid-2020, according to CNBC. Investors were initially hoping for the product to roll out in early 2020. 
• Earlier this month, the chain announced it was testing the two new chicken sandwiches, the crispy chicken sandwich and the deluxe crispy chicken sandwich, in Houston and Knoxville, Tennessee. 
• Stephens raised its full-year guidance for McDonald's U.S. same-store sales estimates to 3.5% from 2.9% "primarily on an anticipated Crispy Chicken Sandwich launch."

Dive Insight:

Stephens also notes that McDonald's chicken sandwich will create significant relevancy. At the very least, it should make its franchisees happy. They've been asking for a competitive, premium chicken product since July. That said, the raised guidance shouldn't be a surprise considering the chicken sandwich sales and traffic lifts experienced by Popeyes in 2019. The initial launch in late August generated a 218% increase in traffic versus average at the chain. 

However, just as Popeyes ran into supply chain issues — causing the chain to sell out in two weeks — Stephens anticipates the same fate for McDonald's. This prediction is based on positive feedback and shortages from the current sandwich tests and a more aggressive price point. McDonald’s crispy chicken sandwich is priced at $3.49, versus Chick-fil-A's at $3.79 and Popeyes' at $3.99.

The U.S. chicken marketplace also has grown more than 14% this year to about $4.5 million sales per store, according to CNBC. But the chicken sandwich space was on a roll well before the so-called chicken sandwich wars that erupted this summer. According to NPD Group, chicken sandwich servings ordered in February 2019, more than six months prior to Popeyes’ initial August launch, were up 4% from the same period a year ago. Comparatively, burger orders were flat for the period. Sales of chicken products in general at QSRs and fast casual restaurants have been on the rise, increasing 42.1% from 2011 to 2016. 

Popeyes, Wendy's and Chick-fil-A have all benefited from their chicken sandwiches. But throw McDonald's 14,000-plus-units into the mix, and the supply chain will no doubt be squeezed even more. 

McDonald's supply chain is a little different however, which could insulate it from any Popeyes-like shortages. Stephens noted that McDonald's uses chickens that are between five pounds and seven pounds, while Chick-fil-A and Popeyes use 5-pound birds for their sandwiches.

The fast food giant also has a case study in Popeyes to follow on what to anticipate. Although Popeyes' sandwich was introduced as a permanent item in August, the product's popularity eroded the chain's entire inventory in just two weeks. A re-launch occurred in early November, but that also included some operational challenges and chaos.

A slightly different bird and Popeyes' case study aside, that's not to say it will be easy for McDonald's. The chain has run into supply issues before. Its buttermilk chicken tenders were so popular in 2017 that it couldn't keep up with demand and had to suspend sales while its supply chain caught up, for example. McDonald's is also planning on adding chicken to its breakfast menu in 2020, which could challenge supply even more considering its giant footprint. 

Still, McDonald's has earned awards for its supply chain efficiency. In 2018, Gartner Inc. moved McDonald's into its "Masters" category, recognizing its sustained supply chain leadership throughout the past decade. So, even if there is more of a squeeze, the chain is likely to be well-prepared.