Sunday, March 16, 2014

McDonalds in Wal-Mart on 410 - Bacon Clubhouse Chicken Grill

I hold McDonald's stock in the personal mutual fund that I manage. This has been a good stock to hold over the past decade, dividend payer and a slow, steady increase doubling in price over ten years.  However 2013 and 2014 to date have been challenging.

McDonald's appears to have three main strategies that are interesting.

The first is value, the dollar menu and, get this, two big Macs for 5 dollars, not sure it is true at all restaurants. Unless I had a friend, two big Macs is a no go, but I love the McDonald's cheeseburger and that is on the dollar menu. So value is one strategy, but that pushes them into a low margin business.

The second strategy is coffee. It is high margin and would serve as a moat against the Starbucks strategy of selling food. My opinion is that McDonalds is not going to take much coffee market share away from Starbucks, not will Starbucks take much food market share away from any of the players with their current product offerings.

The third strategy is to come up with a new "hit" food item. If customers love the Mc_whatever, they will likely favor McDonalds over options like Starbucks, Burger King etc.

This is why I try to sample some of the new offerings. Kathy wanted to go to Wal-Mart to buy some muck, ( gardening), shoes. I drove her there. I was hungry, it was 3 PM, and all I had eaten for the day was some home cooked, low calorie, high fiber, high inflammation fighting ginger snaps. So, while she picked up shoes, I tried one of their new food items, the Bacon Clubhouse Chicken Grill.

I was not impressed at all. The bun fell apart, the flavor was not there. I saw the guy in the kitchen put the "white cheddar" slice on the sandwich, but I could not taste it. I believe with all my heart McDonalds should continue looking for a new hit item and there will be some misses along the way.

Final note, I have monitored the foot traffic to this in store McDonalds for several years. It is steady, someone is always in line to order, but it is not a long line and one or two or even three people are waiting to pick up. Very respectable.

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