The last time McDonald's (NYSE:MCD) tried to sell chicken wings, the company was left with 10 million pounds of unsold chicken and many angry franchisees. Now the company is bringing back a product that was so ignored by customers -- despite a huge advertising push -- that the Hamburglar wouldn't steal them.
The first time McDonald's tried wings
When McDonald's first introduced its wings in September 2013 -- dubbed Mighty Wings -- they were supposed to stop the company from losing business on the fast food side to chains including Yum Brands' (NYSE:YUM) KFC and Domino's (NYSE: DPZ) and the expanding Buffalo Wild Wings (NASDAQ:BWLD) on the sit-down side. The chain acted with the expected excitement during the roll-out.
"Chicken wings are one of the most commonly ordered items at sit-down restaurants while watching sports," said McDonald's USA Marketing Director Leslie Truelove in a press release. "By adding Mighty Wings to our menu this fall, we want to bring the popularity and fun of chicken wings to customers looking for any reason to order them – be it during game day or on-the-go."
Of course you can see the problem from the outset. McDonald's is not a sit-down restaurant where people watch sports. People might theoretically take wings out from McDonald's if they were going there anyway. But if you're bringing back wings to eat while watching the game why wouldn't you get them from a local pizza place or an eatery more dedicated to wings?
And while a lot of media members and analysts have focused on the price of the wings, that was only one factor. The second is clearly that the only dedicated wings customers McDonald's was likely to win over were people already planning to eat at McDonald's already.
So even if the wings had succeeded, they would have done so at the expense of products elsewhere on the McDonald's menu. That would actually have been OK if the wings drove customers from the low-margin dollar menu into a pricier choice, but that didn't happen.
How expensive were Mighty Wings?
When Mighty Wings originally launched they cost around $1 a wing -- a tough price to sell at a chain that will sell you an entire hamburger for a dollar. Officially McDonald's had the launch prices as three pieces for $2.99, five pieces for $4.79, and 10 pieces for $8.99.
Those prices proved too high for the chain's customers.
"The product is good, but the price was too high," Scott Hume, founder of the BurgerBusiness.com blog told USA Today. "The lesson that McDonald's and other quick-service brands keep learning and relearning is that much of the (fast food) audience is unemployed, underemployed, or otherwise very cautious with spending."
Will selling off leftover Mighty Wings help?
Though Mighty Wings flopped the first time the company has very little risk in bringing them back at a lower price -- 5 for $2.99 -- because it still has 10 million pounds of wings in frozen storage. FDA guidelines say that chicken parts can be kept frozen for nine months and still be considered top quality. Legally they can be kept frozen indefinitely if they are properly frozen.
Though selling the wings at a lower profit is better than writing off the excess inventory for franchisees it still leaves their chief complaint -- that the dollar menu makes it hard to sell higher-priced items -- intact.
When Janney Capital Markets analyst Mark Kalinowski surveyed McDonald's franchisees in October, as reported by the Wall Street Journal, many of them commented on how poorly the wings were selling because they were priced well above competitors' offerings.
"Mighty Wings are proving once again that we can't sell premium items in large numbers because we still have the Dollar Menu," one franchisee said in the anonymous survey.
A McFailure now matter how you look at it
Mighty Wings seem like another in a line of McDonald's failed attempts to sell pricier products in order to change customers' perception of the brand as only a low-cost option. Remember McLobster? McPizza? McSpaghetti? The Arch Deluxe? The McLean Deluxe? The Big 'N Tasty?
While those products are likely best not remembered it's not as if the chain has been unable to open up new areas of business. While its McCafe concept may not have worked as well as the company hoped, as you can can read about here -- McDonald's Coffee vs. Starbucks -- Can McCafe Make a Dent? -- the company sells a lot of coffee. It may never be Starbucks, but it was foolish to think it ever would be.
Customers might buy cheaper Mighty Wings instead of a burger off the dollar menu. They might even pick McDonald's over Burger King (NYSE: BKW), Wendy's (NASDAQ: WEN), or other fast food places because they feel like wings without the hassle of a full sit-down meal or getting takeout from a place not primed to offer it.
If wings are going to have a place at the McDonald's table, it has to be as a way to help tilt customers away from picking KFC or another fast food wings brand. McDonald's could make Mighty Wings even cheaper but that won't turn the chain into a sports bar. Buffalo Wild Wings and local sports bars/wing emporiums work because they have an atmosphere (including alcohol) that's traditionally paired with wings.
McDonald's isn't that and adding wings to the menu -- at any price -- won't change that.
The next step for you
Want to profit on business analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing ... starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.
Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings, Burger King Worldwide, and McDonald's. The Motley Fool owns shares of Buffalo Wild Wings and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.