Industry News | July 23, 2012 | QSR Exclusive Brief

Beverages Spur Growth for McDonald's in Q2

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During McDonald’s second-quarter earnings call, CEO Don Thompson told investors the quick serve is growing market share through innovative beverage products. Despite the lackluster global consumer marketplace, he said beverage sales continue to be a “key contributor to growth.”

The new Cherry Berry Chiller helped drive beverages sales, on top of last year’s strong sales from the company’s introduction of McCafe Frozen Strawberry Lemonade, Thompson said. “Clearly the beverage platform has quite a bit of resonance and it is being looked at by many markets around the world.”

The company’s global sales increased 3.7 percent in the first quarter, with U.S. sales trailing slightly at an increase of 3.6 percent.

Food items are also bolstering growth at the company. Thompson said sandwich wraps have “tremendous” opportunity for variations, including shrimp and fish—giving investors a glimpse of what may be in the company’s product pipeline.

Thompson confirmed this pipeline includes several new beef and chicken products, and he said McDonald’s is testing a number of new menu items, some of which are adaptations of local foods from other areas around the world. The company will continue to leverage promotional food offers, such as Spicy Chicken McBites, and new McCafé flavors, he said.

Pete Benson, CFO for the global firm, touched on the potential ramifications of the U.S. Affordable Health Care Act for operators. He estimated the impact on each individual restaurant would vary from $10,000 to $30,000 annually, depending on a store’s number of employees, and the percentage of full-time workers. “We are increasing our conversations and disclosures with franchisees around, What does this mean for brand McDonald’s?”

Benson noted that while the new health care legislation is “a significant item” and has drawn vigorous attention in the U.S. media, as a P&L item, compared to the impact of commodity increases on restaurant operators’ profitability, the latter was greater. “We have managed through items of this magnitude in the past, and I am hopeful we can do that in the future.”

By Jan Fletcher