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McDonald's
Courts Health
Crowd with New Products
Excerpt
By Deborah Cohen,
Reuters Health
McDonald's Corp. is trying to have it
both ways.
The fast food giant is launching
new salads and experimenting with all-white meat Chicken McNuggets
to meet the demand for healthier food, while trying desperately
to prop up the market for its traditional fare of hamburgers and
fries.
Facing its 12th month of declining
sales in the United States, McDonald's is reaching out to the
healthier set. Next week it's unveiling Premium Salads, a line
featuring dressings under the Newman's Own label from actor Paul
Newman.
It's also testing a lower fat,
all-white-meat version of its popular chicken McNuggets in some
New York markets and is offering fresh fruit in Britain. The company
recently revived its Grilled Chicken Flatbread sandwich in the
United States.
"I think they should do this,"
said U.S. Bancorp Piper Jaffray analyst Allan Hickok of the healthy
offerings. "Their competitors have done it and it has worked."
The new salads, in versions such
as California Cobb and Caesar, will have a recommended price of
$3.99, replacing the smaller McSalad Shakers, a convenience
salad offered in a drink-sized cup.
McDonald's said the line has shown
promise in test markets. A store in the Chicago suburbs saw its
lunchtime salad volumes climb to average more than 100 daily from
20 to 25 after making the switch without advertising support,
according to company spokesman Mike Donahue.
The company is also experimenting
with its traditional menu. A new McGriddles breakfast sandwich
that pairs a pancake exterior with syrup and offerings like bacon,
sausage or cheese on the inside, will go national this summer,
he said.
SKEPTICISM REMAINS
But analysts remain skeptical about
the new items, noting that successful menu changes are slow to
come at McDonald's, the largest worldwide restaurant company with
some 30,000 hamburger outlets. The company, which in recent years
added a new production system to its North American stores, is
perceived as lagging competitors in menu innovation.
McDonald's entered a price war
with Burger King, its largest hamburger competitor, in October,
when it launched a Dollar Menu of discounted items such as premium
sandwiches and drinks for a buck. The menu has been blamed for
hurting profits.
Wendy's International Inc., the
No. 3 hamburger chain, has dominated the salad market with innovations
such as its Garden Sensations line, which boosted sales about
10 percent after they were introduced early in 2002, analysts
said.
"The (McDonald's) menu really hasn't
changed that much," said Robert Goldin, an executive vice president
with Chicago based research firm Technomic Inc. "They have made
some attempts" toward healthy offerings "and they're sensitive
to it," he said.
Earlier attempts at blockbuster
offerings like McDonald's lower-fat McLean Deluxe and adult-oriented
Arch Deluxe hamburgers never took off, he said.
Industry watchers applaud McDonald's
for tipping its hat to the health crowd at a time when the company
is under increased pressure over health concerns like obesity
and nutrition.
Analysts, however, don't expect
the hamburger giant to undertake a major shift away from the basics,
to which new Chief Executive Jim Cantalupo said he remains committed.
"Sometimes sticking with the basics,
like having the best burgers, fries and shakes with service as
fast as possible, is what is going to rebuild the business," said
Lehman Brothers analyst Mitchell Speiser.
Indeed, McDonald's has of late
been careful not to make menu moves that could risk sales of items
that have held favor with customers. Last week, it said it was
delaying a move to cook its popular french fries in a lower-fat
oil, noting in a statement that it is "most focused on the satisfaction
of our customers and the quality of our products."
Reference
Source 89
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