Most of the attention ahead of (and during) McDonald’s Investor Day event Wednesday was on the company’s new spinoff, CosMc’s. There’s a good reason for this. McDonald’s doesn’t just go around creating concepts every day and CosMc’s specialty beverage focus injects the global giant into an exciting category.
But we also learned that McDonald’s is doubling down on its core menu at its existing 40,000 or so restaurants and that is the bigger story because that is where a majority of the chain’s profits and sales come from. According to Jo Sempels, president of McDonald’s International Developmental Licensed Markets, 65% of systemwide sales are generated from the core menu, generating more than $75 billion. The core menu alone has added over $13 billion of additional system sales since 2019 and is growing around 7% each year – twice as fast as the rest of the menu.
“That’s the power of fan favorites. We don’t just sell products, we sell brands,” Sempels said during Investor Day. In fact, 17 of McDonald’s core products have become $1 billion brands on their own. “These brands have superior pricing power … because there is no comparable substitution. It also means they drive greater profitability.”
These brands are also about to become even bigger. McDonald’s is currently rolling out its “Best Burger” initiative, for instance, onboarding the upgraded product to 70 markets by the end of this year, with an anticipated global implementation by the end of 2026. The “Best Burger” features more than 50 changes to the chain’s previous offerings, including softer buns, more sauce, and tweaks to the cooking process.
“We’ve identified an unmet customer need with a significant opportunity to drive future growth in beef,” Sempels said.
That said, the company’s chicken platform is now on par with its beef business – about $25 billion in annual sales. This isn’t surprising given the backdrop that chicken has been outpacing beef for the past four decades globally. This is surprising, however, given that McDonald’s was founded on 15-cent (beef) hamburgers.
McDonald’s has long had a chicken category but really sharpened its focus in 2019, when its then-new Accelerating the Arches strategy put the protein at the heart of its growth strategy. Since, its McNuggets category has grown to more than $10 billion in annual sales driven by an increased marketing focus, line extensions like Spicy McNuggets, and sauce innovations. Also, in March, McDonald’s rebranded its crispy chicken sandwich to the McCrispy and that swiftly became a $1 billion brand.
The growth in chicken has fueled even higher ambitions, Sempels said, including further expansion of the McCrispy platform to nearly all markets and an opportunity to expand into tenders and wraps.
“We see potential to add another point of chicken share by 2026,” Sempels said.
Coffee ambitions
In addition to burgers and chicken, McDonald’s is also targeting a more robust coffee business, as the category (and coffee brands) continues to grow at a material clip. Sempels called coffee a “very attractive category” because of that growth, as well as its high profitability and consumer habituation. For its part, McDonald’s McCafe is 30 years old, and the company sells nearly 8 million cups of coffee a day.
“That makes us the number two coffee player globally,” Sempels said. “While we’ve had success, we still haven’t realized our full global potential.”
To do this, McDonald’s plans to break down disparities across its global markets, better leverage its scale advantages, lead with food, and address “known gaps in consistency.”
“First and foremost, we’ll establish McCafe as part of our core menu offering and as our only brand for coffee at McDonald’s,” Sempels said. “Next, we’ll address inconsistencies in availability, experience, and taste by reducing over 100 types of equipment to a smaller list of only five global suppliers. This will ensure gold standard execution around the world while still giving markets the flexibility to address local tastes and preferences.”
The company will also lean in further on cold coffee, which is experiencing a staggering amount of demand. According to Grand View Research, the cold brew coffee market is expected to register a compound annual growth rate above 25% through 2025. Marketwatch reports that the cold brew market was worth $4 million in 2019 and is expected to reach $30 million by the end of 2026.
This focus on coffee is also where CosMc’s could provide some plug-and-play solutions into the broader McDonald’s systems based on its most successful products. CosMc’s menu includes a host of specialty beverages, including unique options like the S’mores cold brew and iced turmeric spiced latte.
“We are developing a plan on how to best adapt and execute against cold coffee beverages and that plan will provide convenience, value, and a high-quality taste synonymous with McDonald’s,” Sempels said. “We’re giving our customers even more reasons to visit.”
Contact Alicia Kelso at [email protected]
