What the 3 Worst Fast Food Flops of 2014 All Had in CommonBy twocents@thestreet (Brian Sozzi) NEW YORK ( TheStreet) -- McDonalds , Burger King and Starbucks all were reminded this year of fast foods golden rule: Price matters. After some high-profile new fast food launches late in 2013, McDonalds, Burger King andBy twocents@thestreet (Brian Sozzi) NEW YORK ( TheStreet) -- McDonalds , Burger King and Starbucks all were reminded this year of fast foods golden rule: Price matters. After some high-profile new fast food launches late in 2013, McDonalds, Burger King and Starbucks were all forced to wipe them off the menu in early 2014. McDonalds found out quickly -- by February -- that it couldnt sell giant spicy chicken wings for $1 apiece. Burger King, which is likely to create new Tim Hortons products in 2015 after it finalizes its merger with the Canadian coffee chain, may have learned from the debacle of trying to sell lower-calorie, pricey French fries dubbed Satisfries. Those were yanked from the menu in August. And even Starbucks, not known for missing the mark on its coffee, had to retreat in April from offering small, fancy pastries with an overly buttery taste. In a fast food business desperate for sales growth at older store locations, the headline-grabbing missteps on important new products highlighted diners price resistance about food meant to be eaten on the run. Now 2015 is sure to bring a slew of new products from fast food companies eager to entice the hungry masses. And investors are looking for growth. TheStreet takes a look back at the worst flops in the fast food industry for 2014, as McDonalds, Burger King and Starbucks were all taught a hard lesson. 1. Burger Kings Satisfries get stale -- and quickly. On Sept. 24, 2013, Burger King launched the crinkle-cut French fry known as the Satisfry, which was dubbed by execs at the chain as a better-for-you option on the classic French fry. The fries had 20% fewer calories than Burger Kings regular fries due to a batter concocted to soak up less oil. And the crunchy potatoes had 30% fewer calories and 40% less fat than fries founds at rival McDonalds. The fries cost $1.89 for a small order, $0.30 more than for the standard fries. In effect, Burger King was charging its price-sensitive customers a premium to watch their waist line. In the U.S. and Canada, we launched Satisfries, a first-of-its-kind better-for-you French fry, which demonstrates our commitment to leading innovation in the QSR industry, boasted Burger King on its third-quarter 2013 earnings release. But consumers werent buying Burger Kings strategy. In August of 2014, Burger King announced that it would stop selling Satisfries. The company exited the business with not much to show for it efforts. Same-restaurant sales in the U.S. and Canada declined 0.3% in the third quarter of 2013, during the fries launch period, rose a modest 0.2% in the fourth quarter, and then cooled to 0.1% in the first quarter of this year. Must Read: Just When You Thought Starbucks Was Everywhere, Heres a New Twist 2. McDonalds Mighty Wings promotion nosedives. Some seven days before Burger King launched its low-calorie Satisfries, McDonalds stayed true to its fatty food roots and re-introduced Mighty Wings nationally after a year of development. (The product had first launched in 1990 but was taken off the menu in 2003.) The price? A lofty $1 a wing. By adding Mighty Wings to our menu this fall, we want to bring the popularity and fun of chicken wings to customers looking for any reason to order them, said McDonalds when the eight-week promotion kicked off in September 2013. By the time McDonalds execs held their third-quarter 2013 earnings call on Oct. 21, they were already clucking a different tune. Mighty Wings resonated with consumers but performed at the lower end of our expectations, said president and CEO Don Thompson. He added, There are a couple of things we can improve on. One is still affordability -- $1 per wing was still not considered to be the most competitive in the current environment. So why were they back in 2014? And why were they so much cheaper? McDonalds brought back the Mighty Wings on Feb. 27, 2014, at a steep discount to clear excess chicken wing supply. The wings sold at a 40% price reduction, with one order of five wings now costing $3, or $0.60 per wing. The product is no longer on the menu. Similar to Burger Kings experience with Satisfries, McDonalds reaped little positive impact on sales with Mighty Wings. U.S. same-restaurant sales increased 0.7% in the third quarter of 2013 during the launch period, and then went on to decline by 1.4% and 1.7% during the fourth quarter of 2013 and the first quarter of 2014, respectively. The Mighty Wings failure sheds light on the challenges McDonalds faces with its new build-your-own-burger initiative. The burgers are priced higher than a traditional value meal. A customized burger with a medium drink and fries could run a person north of $8.29 at McDonalds, compared to a $5 value meal. Must Read: One Way Retailers Are Making Online Holiday Shopping Easier 3. Starbucks finds out that, yes, its selling fast food. April 2014 brought a rare admission of failure from the hard-charging Starbucks. Seattles favorite coffee chain said it would be bringing back its original banana, pumpkin and iced lemon loaf cakes, using recipes consumers came to love. Starbucks decision was an answer to people expressing outrage via social media and emails on its new La Boulange brand pastries. The complaint? La Boulange pastries were too pricey given the size -- a small La Boulange loaf cost as much as $3 -- and too buttery. The La Boulange brand, known for its upscale pastries and sandwiches, was acquired by Starbucks for $100 million in June 2012. Starbucks was caught off-guard by the stumble, which turned out to be more of a PR hit than a financial one, given the small scope of the foods impacted. Food continues to be an important component of our growth strategy, and were extremely encouraged by both customer response to La Boulange and the sales lift were seeing over the food products La Boulange we placed, said Starbucks chairman and CEO Howard Schultz on an Oct. 30, 2013 earnings call. But on the April 24, 2014, earnings call, just days after bringing back the old loaf recipes, Schultz backtracked on La Boulange. We continue to make enhancements throughout the lineup, and as a result as we expand to new cities and leverage the operational learnings from those before, he said. We see stronger results after launch. In the most recent quarter, Starbucks completed the rollout of La Boulange-branded food in all its company-operated and licensed stores in the U.S. Sales of food added 2 percentage points to Starbucks Americas 5% same-store sales growth in the companys fourth fiscal quarter. Hopefully Starbucks learned a lesson: value matters. Despite its La Boulange pastry flop, Starbucks plans to make beer and wine available in up to 25% of its 12,000 U.S. stores over the next five years. In total, the worlds largest coffee-chain is looking to double its revenue from food to more than $4 billion in five years time. Must Read: Retail Outlook: 3 Headline-Grabbing Surprises to Look for in 2015 Click to view a price quote on MCD. Click to research the Leisure industry. ift.tt/1gB4pon
Posted on: Tue, 16 Dec 2014 12:20:25 +0000