McDonald's Burgers Get a Little Less Beefy

With beef prices on the rise, McDonald's (NYSE: MCD  ) has officially decided to remove its Angus Third Pounder burgers from the menu by the middle of next month.

McDonald's stock

Angus Deluxe burger. Source: McDonald's.

From a profitability standpoint, the move certainly makes sense considering sales for the huge burgers have remained soft lately. I suppose that shouldn't come as a surprise, though: Each of the premium Angus burgers -- which McDonald's has offered on its menus since 2009 -- costs between $4 and $5, and Mickey D's couldn't very well raise the price to account for the ever-increasing cost of beef, especially when customers could instead buy several smaller burgers from the Dollar Menu offerings.

Of course, McDonald's isn't alone in struggling to offset increased food costs; margins at fast-casual competitor Chipotle Mexican Grill (NYSE: CMG  ) , for instance, were hit hard last year after the company remained reluctant to raise prices to offset higher food costs.

Unlike McDonald's, however, Chipotle relies on a comparatively streamlined menu, and its burritos already stood at considerably higher price points than even the most expensive McDonald's menu items. McDonald's, for its part, enjoys the flexibility of its versatile menu and a customer base that doesn't mind change -- that is, as long as classic menu items like the Big Mac and Quarter-Pounder remain.  

What have they done for you lately?
Luckily, for those consumers who still lament the passing of the Angus burger, McDonald's is offering some solace by officially adding three new Quarter-Pounders, which, incidentally, it starting rolling out on a test basis last November.

Two of the new Quarter-Pounders will come in the same Bacon & Cheese and Deluxe varieties as their slightly larger Angus kin. Apparently, however, the Mushroom & Swiss burger will fall by the wayside to be replaced by a new face-melting Habanero option.

That's exactly what makes this such a brilliant move by the folks at McDonald's, who arguably know better than anyone that their customers will embrace the new burgers given their lower price points. What's more, the company can now focus less on dwindling beef margins and more on leveraging the power of its established Quarter-Pounder brand, while at the same time improving upon it with cheaper supplemental ingredients.

Foolish final thoughts
This kind of flexibility is a big reason McDonald's has been able to maintain its leadership over the long haul with more than 34,000 locations across the globe. Even better, it's also just one of many reasons McDonald's stock still trades near 52-week highs, and should easily find a home in any well-diversified portfolio.

Our top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2429542, ~/Articles/ArticleHandler.aspx, 10/1/2016 1:26:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 16 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
MCD $115.36 Up +0.57 +0.50%
McDonald's CAPS Rating: ***
CMG $423.50 Up +2.77 +0.66%
Chipotle Mexican G… CAPS Rating: ****