Those McDonald's (NYSE:MCD) Happy Meals don't seem to be flying off the counter the way they used to. The Wall Street Journal took a look at the plight of the iconic kid meals yesterday. McDonald's doesn't break down Happy Meal sales metrics, though the newspaper noted that restaurant operators confirm that the once-popular child value meals are waning in popularity.
The logical explanation is that the chain's Dollar Menu has eaten into sales. Kids can assemble their own budget-minded combinations. Burgers become double cheeseburgers. You won't see anyone cramming a pair of apple pies into a Happy Meal box for a buck.
However, that can't explain it completely. If kids are ordering off the Dollar Menu, wouldn't penny-pinching diners be scaling back on those $5 to $6 value meals? They're the more practical candidates to turn a $6 grilled chicken meal into a $3 a la carte mix of a McChicken, small fries, and a soda.
But that's not happening. Shares of McDonald's hit a seven-year high this week in part because folks are going upscale, despite the buck temptations. March comps soared an astronomical 8.2% at Mickey D's.
So I'm not buying the proliferation of Dollar Menunaires for the Happy Meal shortfall. Another argument may be that parents are recoiling from the Happy Meals as unhealthy, but now that they can replace fries with apple slices and opt for healthier beverages, is that really a problem?
McDonald's is trying. It's apparently devising lower-sodium recipes for its McNuggets. It probably won't be long before healthier fare like its grilled chicken wraps show up as Happy Meal alternatives. Still, that doesn't seem like a good reason, either. Burger King (NYSE:BKC), Wendy's (NYSE:WEN), and McDonald's all offer healthier options, but hang out by the drive-thru window, and you'll see that fries and sodas remain the accompaniments of choice.
Maybe the problem is in the marketing. Ronald McDonald seems to be outdone by BK's The King. A few years ago, McDonald's had contracted with the same animation team responsible for many hit Viacom (NYSE:VIA) shows to put out McDonald's videos, and that kind of commitment seems missing.
It may be something as simple as the toy premiums. When McDonald's had Disney (NYSE:DIS) as an exclusive partner, it had a steady flow of popular Disney and Pixar toys to distribute. The companies have agreed to see other people, which finds McDonald's pitching toys like Wizard of Oz premiums this month.
Golden arches leading to yellow brick roads? I can't see that as a major driver. Especially when BK's got SpongeBob SquarePants in its corner this month.
Face it. The Happy Meal isn't going to die, but McDonald's is unlikely to work too hard to get it back into favor. Why is that? Did you see the March comps? Did you see the stock chart? Even a kid -- one who used to devour those Happy Meals -- knows the answer to that.
For more on these fast food giants, check out:
- McDonald's Wants a Title Shot
- Burger King's Less Subservient Chickens
- Still Turning a Corner at Wendy's
Disney is a Motley Fool Stock Advisor newsletter recommendation. You go, Mickey!
Longtime Fool contributor Rick Munarriz enjoys those healthy Apple Dipper slices at McDonald's, but only because they come with those caramel dipping-sauce cups. He does own shares in Disney. He's also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
