Dive Brief:
- Research firm Stephens predicts 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 hoping for a rollout in early 2020.
- This month, the chain announced it was testing two new chicken sandwiches, crispy and the deluxe crispy, 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:
The popularity of Popeyes, Wendy's and Chick-fil-A's chicken sandwiches stressed the supply chain this year. Throw McDonald's 14,000-plus-units into the mix, and the supply chain will be squeezed more. Popeyes ran into supply chain issues — causing it to sell out in two weeks — Stephens anticipates a similar fate could hit McDonald's.
McDonald's supply chain offers a bit of insulation — at least against a Popeyes-like shortage. Stephens noted McDonald's uses chickens that are between 5 and 7 pounds, while Chick-fil-A and Popeyes use 5-pound birds.
McDonald's can use Popeyes as a case study. Although Popeyes' sandwich was introduced as a permanent item in August, popularity eroded the chain's entire inventory in two weeks. A re-launch occurred in early November, but that also included 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. McDonald's is also planning on adding chicken to its breakfast menu in 2020, which could challenge supply.
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 decade.
The chicken sandwich space was on a roll well before the 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. Sales of chicken products in general at QSRs and fast-casual restaurants have been on the rise, increasing 42.1% from 2011 to 2016.
The U.S. chicken marketplace has grown more than 14% this year to about $4.5 million sales per store, according to CNBC.
