Value-focused menus continue to attract budget-conscious diners, as fast‑food chains lean into affordability while pricier rivals struggle.

The company’s Burger King chain introduced ‘2 for $5’ and ‘3 for $7’ value meal offers over the last year.

McDonald’s also topped estimates for its fourth-quarter global comparable sales and profit on Wednesday, helped by meal deals and strong marketing promotions.

Same-store sales at its Burger King outlets in the U.S. rose 2.6 per cent for the quarter.

It posted an adjusted profit of (U.S.) 96 cents per share for the quarter, topping estimates of 95 cents per share, according to data compiled by LSEG.

The company reported quarterly same-store sales growth of 3.1 per cent, compared with estimates of a 2.8 per cent rise.

— Reporting by Sanskriti Shekhar in Bengaluru

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More Americans are expected to try the drugs as a pill rather than as a shot because the medication will be cheaper and many patients are hesitant to inject themselves.

The U.S. Food and Drug Administration approved Novo Nordisk’s Wegovy GLP-1 pill on Monday, sending shares of food companies down on Tuesday. Eli Lilly’s rival medication is expected to gain approval from regulators next year.

Shifts in consumer taste

Food companies including Conagra Brands and Nestle are already dealing with shifts in consumer tastes toward higher protein and smaller portions due to the popularity of weight-loss injections, and analysts believe widespread GLP-1 adoption could mean long-term changes in demand.

To cope, businesses are promoting products with more protein, tweaking labeling to say they are GLP-1 friendly and working with large retailers to better market products.

“We are seeing people cut (back) specifically on salty snacks, liquor, soda, drinks, and bakery snacks, and more focused on protein and fiber, so we expect food companies and also restaurants to cater to this audience that is growing,” said JP Frossard, consumer foods analyst at Rabobank.

“We’ll see more access to those drugs and a higher addressable market for products that have in mind the needs of the GLP-1 user,” he said.

Andrew Rocco, stock strategist at Zacks Investment Research, called Novo’s approval “groundbreaking” because the pill would be cheaper than the injectable version of Wegovy and deliver the same weight-loss metrics. “High protein, smaller portions, and functional food innovation will be necessary,” he said.

Food companies are taking note

Some 40 per cent of American adults are obese, U.S. government data shows, and around 12 per cent of adults say they currently take GLP-1 drugs, according to a poll published last month by health policy research organization KFF.

Households using GLP-1 medications cut spending at grocery stores by 5.3 per cent and fast-food restaurants by about 8 per cent on average, according to a Cornell Research study published last week that used purchase data collected by Numerator from about 150,000 households.

Those reductions largely faded when households stopped using the medication.

“The decreases we saw will likely show up in a much broader slice of the population” because of weight-loss pills, said Sylvia Hristakeva, one of the study’s co-authors. She said the cheaper price and ease of use of pills will also make it likely that people use the medication for longer.

While the Cornell study found modest increases to spending only in a handful of categories like yogurt and fresh fruit, companies are taking note.

‘GLP-friendly’ foods

Earlier this year, Conagra started labeling some of its Healthy Choice frozen meals with high protein and fiber as “GLP-1 friendly.” A spokesperson said those meals are selling faster than rival products making similar claims on their packaging. The company plans to introduce new Healthy Choice recipes with the same labeling in May and work with grocers like Walmart and Kroger to market them, the spokesperson said.

French dairy company Danone, which makes Oikos Greek yogurt, said in a statement that it is seeing double-digit growth in its high-protein offerings, a trend that has accelerated with the adoption of GLP-1 medications.

Nestle, the world’s biggest food company, has also introduced new frozen meals that cater specifically to GLP-1 users, called Vital Pursuit. The Swiss company did not respond to a request for comment.

Fast-casual Mexican chain Chipotle on Tuesday added a “High Protein Menu” that features, among other items, a single cup of chicken or steak.

In recent months, some restaurant chains including Olive Garden have added menu items for smaller, cheaper portions.

Noodles & Company marketing head Stephen Kennedy said such menu additions were about offering guests “options that satisfy without going overboard.”

— Additional reporting by Savyata Mishra in Bengaluru

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Comparable sales in the U.S., McDonald’s biggest market, fell 1.4 per cent in the fourth quarter, its steepest drop since the height of the COVID-19 pandemic almost five years ago when restaurants limited operations to drive-thru and delivery.

Analysts on average had estimated a 0.4 per cent decline, according to data compiled by LSEG.

The burger giant saw customer visits weaken following an E.coli outbreak that started on October 22 and forced McDonald’s to temporarily suspend sales of its Quarter Pounder hamburgers in a fifth of its 14,000 U.S. restaurants.

The U.S. Centers for Disease Control and Prevention on December 3 ended its investigation of the incident, which sickened hundreds and killed at least one person.

Similar to fast-food rivals such as Yum Brands and Wendy’s, McDonald’s also ramped up its limited-time offers and meal deals throughout 2024 in an attempt to spur spending among customers preferring to eat meals at home.

The company extended its $5 meal deal launched in June into December and introduced Chicken Big Mac in October, along with other special releases.

Customer traffic ticked up slightly in the quarter from last year, McDonald’s reported, but that increase was offset by a smaller average amount spent per customer per visit.

Analysts have warned that the company’s overreliance on discounts, which now account for over a third of sales, according to BTIG analyst Peter Saleh, could pressure franchise margins in the future.

“In our view, the challenge McDonald’s faces in the months and quarters ahead will be weaning customers off these deep discounts,” Saleh said.

Comparable sales in the company’s International Developmental Licensed Markets segment rose 4.1 per cent in the quarter ended December 31, beating estimates of a 0.43 per cent drop. The improvement was led by Middle East and Japan markets.

Sales in international markets rose 0. per cent, saddled by weakness in Britain.

Global same-store sales increased 0.4 per cent in the quarter, a surprise rise compared with analysts’ expectations of a 0.63 per cent decline.

McDonald’s posted a five per cent drop in net income to $2.04 billion ($C2.92 billion) on an adjusted basis, compared to estimates of $2.07 billion (C$2.96 billion)

—Reporting by Savyata Mishra in Bengaluru and Waylon Cunningham in New York

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KFC’s same-store sales in the U.S. tumbled five per cent, marking their third straight quarter of declines this year.

The drop came even as Yum in August launched $5 offers on two new items under its “Taste of KFC” value menu, including eight-piece chicken nuggets pack as well as a chicken nugget meal bowl in addition to the two-piece drum and thigh meal.

The company was responding to the ongoing “value wars” in the fast-food industry from peers such as McDonald’s and Burger King.

The chain, like many of its peers, has also contended with diners seeking deals and discounts when eating out to counter menu prices that remain high.

Yum’s Tex-Mex food chain Taco Bell, in contrast, remained a bright spot. U.S. same-store sales rose four per cent, the 11th straight quarter of increase.

The company’s worldwide comparable sales fell two per cent, compared with market expectations of a 0.23 per cent rise, as per data compiled by LSEG.

In international markets, the Pizza Hut parent faced the protracted impact from boycotts related to Israel’s war in Gaza.

Sales impact from the conflict had surfaced in several other markets beyond Malaysia, Indonesia and the Middle East, executives had said in August.

Burger King parent Restaurant Brands International missed quarterly revenue expectations on Tuesday, while McDonald’s reported its biggest quarterly global sales drop in four years last week.

Excluding items, Yum earned $1.37 per share in the third quarter ended Sept 30. Analysts on average were expecting a profit of $1.41 per share.

— Reporting by Juveria Tabassum

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Shares of the company were down 2.4 per cent before the bell on Tuesday even as it beat profit estimates.

Global sales fell 1.5 per cent in the third quarter, the biggest decline in four years, compared with analysts’ average estimate of a 0.72 per cent fall, according to data compiled by LSEG.

Last week, McDonald’s temporarily paused serving Quarter Pounders in a fifth of its 14,000 U.S. restaurants in an E. coli outbreak that has killed at least one person. Shares declined nearly seven per cent last week as infections rose to 75 people. Quarter Pounders were being added back to the menu this week.

Slivered onions used in the hamburgers are likely to be the source of the infection, with the Colorado Department of Agriculture over the weekend ruling out beef patties as the possible cause.

Customer visits in the U.S. fell 6.4 per cent, 9.1 per cent and 9.5 per cent year-over-year on October 23, 24 and 25, respectively, according to a Gordon Haskett note. The company’s conference call on earnings is expected to focus on any fallout from the outbreak.

The outbreak likely has thrown a near term “monkey wrench” into the U.S. sales recovery when coupled with mixed third-quarter results, Citi analyst Jon Tower said.

The fast-food chain has been hit by slowing customer visits across the U.S., France, UK, Middle East and China as price-conscious shoppers looked for cheaper meals and cooked more at home.

International markets struggle

Sales in international markets fell 2.1 per cent, driven by weakness in France and Britain, compared with estimates of a 1.21 per cent drop.

Weaker consumer spending in China and impacts of the Middle East conflict have dented McDonald’s business segment where restaurants are operated by local partners, with sales dipping 3.5 per cent compared with a 10.5 per cent rise a year earlier.

“We believe European economies remain under pressure with potential for softer traffic from concerns with war in the Middle East, especially in urban markets, and some pressure on costs from a stronger dollar,” Jim Sanderson, analyst with Northcoast Research.

Western fast-food chains such as McDonald’s and Starbucks have seen boycott campaigns over their perceived pro-Israeli stance and alleged financial ties to Israel.

U.S. comparable sales grew 0.3 per cent, reversing the previous quarter’s drop, aided by promotions.

Overall sluggish demand has prompted fast-food chains including McDonald’s, Wendy’s, Burger King and Taco Bell to lean into meal bundles and limited-time offers in a bid to revive traffic, especially among lower-income customers.

McDonald’s CEO Chris Kempczinski said the company was focused on affordability as customers continue to be mindful about spending.

The Chicago-based company earned $3.23 per share on an adjusted basis, above analysts’ estimates of $3.20.

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“Beyond Meat and McDonald’s co-created the plant-based patty which will be available as part of their McPlant platform,” a Beyond Meat spokesperson said in an email.

After McDonald’s announced its McPlant line earlier in the day, shares of plant-based meat maker Beyond Meat fell eight per cent.

Beyond Meat was the front runner for a contract as it had conducted tests of a so-called “P.L.T.” burger at nearly 100 McDonald’s locations in Ontario earlier this year.

McDonald’s reported market-beating profit and revenue for its third quarter on Monday.

“Plant-based products are an ongoing consumer trend. It’s not a matter of if McDonald’s will get into plant-based, it’s a matter of when,” McDonald’s CEO Chris Kempczinski said on a call with analysts.

Analysts, rival fast food companies and plant-based protein producers have been closely watching McDonald’s plans as it is one of the few national chains yet to sell plant-based meat burgers on a permanent basis.

While other chains have started offering plant-based meat options, including Restaurant Brands International’s Burger King, White Castle and Dunkin’ Brands, a McDonald’s contract could be the biggest and would put the plant-based meat movement front and centre in mainstream America.

McDonald’s said under its McPlant line, it could offer products including burgers, chicken substitutes and breakfast sandwiches, which it expects to test in some markets in 2021.

— Reporting for Reuters by Uday Sampath in Bangalore and Hilary Russ in New York; writing by Siddharth Cavale.

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Big fast food chains, including McDonald’s and KFC owner Yum Brands, have been aggressively expanding their international operations to counter slowing growth in the U.S.

Toronto-based Restaurant Brands, the owner of Burger King, Tim Hortons and Popeyes Louisiana Kitchen, has been looking to boost its businesses by deploying various initiatives that range from app-based ordering to loyalty programs for its customers.

The company, which held its first-ever investor day on Wednesday, did not immediately respond to a request for investment details of its expansion program.

Restaurant Brands, which has been hit by a slowdown at its three iconic brands, hopes to grow its coffee, burger and chicken markets by five to six per cent annually over the next five years.

Last month, the company reported a 0.6 per cent drop in comparable sales at Tim Hortons for the quarter ended March 31, while same-store sales at Burger King grew 2.2 per cent, down from 3.8 per cent a year earlier.

The announcement of the ambitious expansion plan comes just months after Jose Cil took the helm at the company, after having headed its Burger King unit.

Rival Yum Brands opened 372 new KFC outlets in 46 countries in the first quarter ended March, while McDonald’s plans on opening roughly 1,200 restaurants worldwide this year.

Tim Hortons, Restaurant Brands’ coffee and doughnut chain, also said it would introduce three new sandwiches using the vegan burger maker Beyond Meat’s plant-based sausages as demand for vegan alternatives grows in the country.

Shares of Restaurant Brands, which have risen nearly 26 per cent this year, were up marginally at $89.67 on the TSX late Friday afternoon.

— Reporting for Reuters by Shradha Singh in Bangalore.

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For more than four years now, farmers have tweeted angry tweets. They’ve written nasty letters. They’ve called on all of us to boycott the burger chain since it started serving beef produced with no added hormones, eggs produced from vegetarian hens, and chicken raised without antibiotics — and more significantly, marketing the fact.

Farmers’ beef against A&W is two-fold. Firstly, they argue that the claim that its burgers are better isn’t science-based. Gosh, if every claim in marketing had to be science-based, we’d all be driving the same kind of car, using the same shampoo and eating the same yogurt. There are places in the world that are like that and they are not places most of us would choose to live.

Secondly, the chain is accused of being disloyal to Canadian producers because it sources an unknown quantity of its hormone-free beef from outside the country. Apparently the disgruntled farm community is also boycotting the commercials that profile Canadian ranchers in Alberta and Saskatchewan who also supply the fast-food chain.

Global supplier, local attitude

Beyond that, Canada has set its sights on being a food superstore to the world. Its red meat, grains and oilseeds sectors are hugely dependent on customers in other parts of the world eating what they produce.

The Canadian industry and governments have spent countless millions fighting efforts elsewhere to enforce local consumption over imports, including the European Union’s ban on meat produced using artificial hormones and the U.S. country-of-origin labelling legislation. Those legal battles were won, but whereas the U.S. changed its policy, the EU opted instead to pay the penalties rather than import hormone-treated beef.

Expecting Canadians to only eat Canadian-sourced is a dichotomy that has no place in an industry aiming to be a global supplier.

Not about the science

Use of growth implants in cattle production has been scientifically validated as a sound and safe practice. Research cited on the Beef Cattle Research Council site shows that beef from implants contain slightly elevated levels of estrogen and testosterone, but those levels are a fraction of naturally occurring levels found in a can of beer, a serving of cabbage or eggs.

Implanted cattle grow faster and more efficiently, which produces more beef with fewer resources. That reduces the industry’s environmental footprint, which should be a selling feature in some quarters.

There is data floating around that spells out how many more cattle would be needed to produce the same amount of beef or how much prices would have to rise to compensate farmers for not using the technology.

Those calculations presume that it is every consumer’s goal to eat as much beef as possible for the least cost, which doesn’t mesh with the “millennial effect” on the food industry.

More yield, less quality

However, BCRC research also shows that implants have a negative effect on the quality grade unless producers increase the target bodyweight for marketing.

The latest national beef quality audit indicates the industry may have maxed out on that front. Carcass weights have been increasing at an average rate of seven pounds per year since the mid-1970s. Although quality grades have been rising as well, the yield grades, a measure of the amount of useable meat the carcass delivers, have dropped from 63 per cent of carcasses achieving the top yield grade in 2000 to 37 per cent in 2016-17.

Also on the rise are liver abscesses, which are linked to the feedlot sector’s reliance on high-energy feeds. The quality audit calculated the cost of unsellable livers to the processors, but not how much it might be costing the feeders by way of reduced performance or the cost of using antimicrobials to keep them in check.

It would seem that at least a portion of the increased feed “efficiency” the industry has achieved through implants and other measures is now ending up as waste on the processing floor.

That doesn’t mean the industry should stop using them, only that the science around the impact of production-enhancing technologies is far from complete.

All about marketing

But this isn’t about science. It is about marketing, and it would appear that A&W is on to something.

A&W took a big gamble when it decided to target its marketing on food qualities that might appeal to the millennial generation — a demographic that is reshaping the entire food chain because of its penchant for convenience and its values-based approach to food choices.

The campaign has by all accounts been successful, reportedly increasing sales as much as eight per cent at a time when some of its competitors have seen negative growth.

The A&W campaign is attracting new customers to beef at a time when other alternatives such as “impossible burgers,” “fake meat,” insect protein and plant-based proteins are gaining traction.

Perhaps the beef sector should be grateful rather than growly. If the industry could swallow its pride for just a second or two, it might even learn something from the A&W experiment.

At a time when farmers make up less than two per cent of the Canadian population, and there is no shortage of suppliers willing to meet its specifications, farmers’ boycott matters little to a largely urban burger chain’s bottom line.

Continuing efforts to ‘punish’ A&W are about as productive as throwing pebbles at a freight train. It’s time to build bridges, not dig moats.

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Defining sustainability is important, according to a beef brand officer, because in some cases it’s something consumers want — in increasing amounts — though they don’t necessarily know what it is.

Beef consumers are moving away from traditional definitions when it comes to defining quality, industry experts say.

Consumers used to focus on marbling, but now they look for beef that can be described as wholesome, humanely raised, natural, organic and grass-fed.

But those words might not be the first that come to mind when consumers think about fast food.

That could change though, as McDonald’s plans to use verified sustainable sources starting in 2016, and will get a portion of that meat from Canadian producers.

“This sounds simple, but it’s actually a big challenge because there hasn’t been a universal definition of sustainable beef. That’s why we joined forces with other stakeholders to build coalitions and influence industry-wide change,” McDonald’s said on its website.

At the beginning of October, McDonald’s reached another level in its commitment to using sustainable beef.

McDonald’s came up with five indicator categories, and ranchers and processors have been testing the requirements in a pilot program, so far 34 have been verified.

Sustainability is something consumers want, even if they don’t necessarily know what it means.

“In many cases is it’s a buzzword instead of an actual thing you can rely on and measure, and be able to show results on, and show growth,” said James Bradbury, brand officer at Canada Beef. Bradbury has worked with McDonald’s on the Canadian Roundtable for Sustainable Beef.

As meat prices rise, so do consumers’ expectations about what they should be getting, he added. Consumers want to feel like they can trust the people that make their products.

“I think that there’s this high expectation that consumers have toward our industry. We need to do a better job of making sure we connect with them on it—on an emotional level.”

McDonald’s is just one of several companies working to deliver a product that is better, or perceived as better, for consumers or the environment.

A+W in 2013 launched its “Better Beef” TV commercials and a website that featured a few of the ranches it buys from. A+W promised to serve beef with no added hormones or steroids.

Many farmers were less than thrilled with the campaign, as A+W moved to sourcing some of its meat from outside Canada to fit those criteria.

Several articles written by farmers and those in the farming community accused the marketing campaign of fearmongering — but according to a representative from A+W, consumers liked the product.

Susan Senecal, chief marketing officer for A+W, last year said the campaign had exceeded expectations, including burger sales and customer feedback.

Sometimes consumers have a fundamental misunderstanding about beef products, said Brian Perillat, manager and senior analyst at CanFax.

“It’s unfortunate because today consumers are so far removed from agriculture, I think sometimes they get conflicting messages on what they’re wanting.”

He credited McDonald’s with trying to educate consumers in the process of its campaign, and said the company has been doing a lot to bridge the gap between consumers and producers.

“It’s a struggle we have. There seems to be a lot of negativity around agriculture, and our larger-scale production practices and science, there’s just so many conflicting messages out there. Producers get caught in the middle sometimes.”

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @jade_markus on Twitter.

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The world’s largest fast-food chain, with more than 36,000 restaurants around the globe, just finished one of its toughest years in decades.

It struggled to recover from a food scare in China that battered Asian sales and wrestled with economic weakness and political upheaval in Europe, its top revenue market. The company also lost market share to rivals in the U.S., where its image has been dented by frequent protests from workers seeking higher wages.

Sales at established restaurants, a closely watched gauge of performance also known as comparable sales, fell during the fourth quarter and for all of 2014. Revenue and net income suffered the same fates.

CEO Don Thompson, who took the helm in July 2012 and is under pressure to turn the business around, said he expected the trend to continue as McDonald’s works to make the business to be more nimble and responsive to customers.

“January comparable sales are expected to be negative and results are expected to remain pressured, particularly in the first half of the year,” Thompson said in a statement.

The company, trying to find the right recipe for diners’ growing appetite for healthier and fresher food, is trimming complicated menus, giving more control back to restaurant operators and testing customized burgers and sandwiches to compete with popular restaurants such as Chipotle Mexican Grill and Subway.

Fourth-quarter net income dropped 21 per cent to $1.1 billion, or $1.13 per share, while revenue fell more than seven per cent to $6.57 billion (all figures US$). Global sales at established restaurants were down 0.9 per cent.

U.S. comparable sales in December offered a glimmer of hope, rising 0.4 per cent and marking the first increase since October 2013.

McDonald’s set a 2015 capital spending target of around $2 billion, down from about $2.7 billion last year.

Company shares, which have underperformed rivals, the Dow and the S+P 500, dipped 0.4 per cent to $90.62.

— Reporting for Reuters by Lisa Baertlein in Los Angeles and Yashaswini Swamynathan in Bengaluru.

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