Since McDonald's opened its first restaurant, there's been little debating the fact that its food is, to be delicate, not exactly befitting of a healthy lifestyle. For decades though, it never mattered. Consumers flocked to McDonald's on a daily basis. As a result, the company grew into one of the most valuable in the world.
In recent years, a change has taken place. Consumers are slowly paying more attention to their eating habits and are widely desiring healthier alternatives even within the fast food industry. While some fast food chains have remained steadfast with their menu offerings, industry giant McDonald's (NYSE:MCD) is embracing the trend. Here's why it may pay off.
Lifting Its Head Out Of The Sand
Obesity, particularly among children, has gripped the nation as a full-blown health epidemic. At long last, consumers are taking notice, and the question now from an industry perspective is which fast food chains will adapt. McDonald's has slowly rolled out several new strategic initiatives designed to once-and-for-all eliminate the presumption that it's the problem, and not a solution, to our national health crisis.
For example, the company first generated controversy when it began listing calorie counts of its meals at its locations. Then, McDonald's unveiled several new menu items that were certainly a departure from its traditional burger-and-fries offerings. These include Chicken McWraps, which have done very well, as well as the addition of egg whites to its breakfast menu.
But, McDonald's didn't stop there. More recently, McDonald's announced that it will start offering fruit, salads, and vegetables as alternatives to fries in its meals. In addition, McDonald's will only advertise water, milk, and juices in its child-oriented Happy Meals. All told, the company wants to reverse its image, which has soured in recent years. Particularly for younger generations, including Millennials, McDonald's lost a great deal of credibility as it became the poster boy for fatty, greasy foods contributing heavily to America's expanding waistlines.
A Leg Up On The Competition
While McDonald's is greeting rapidly changing consumer preferences with open arms, other fast food chains have, for the most part, stuck to their guns. Industry competitor Wendy's (NASDAQ:WEN) has largely ignored calls for healthier options. While it does offer salads and other items not specifically designed to clog arteries, it hasn't pushed those offerings to the forefront of its marketing strategy. The company is doing well nevertheless, as it benefits from popular new items such as its Pretzel Bacon Cheeseburger.
Rival Burger King Worldwide (NYSE:BKW) is in the process of rolling out a new initiative of its own, which is to offer lower-calorie French fries. Burger King's new fries will contain 30% less fat and 20% fewer calories than its current fries, and 40% less fat and 30% fewer calories than McDonald's fries. While it's not exactly a revolutionary concept, Burger King does deserve credit for doing something rather than nothing.
Give Credit Where It's Due
I'm inclined to applaud McDonald's decision to get in front of shifting consumer tastes rather than close its eyes and cover its ears as so many of its competitors have done over the past several years. McDonald's growth has slowed in recent years and it needs to do something to move the needle. Consider that the company grew both revenue and diluted earnings per share by just 1.7% in 2012 versus the prior year.
McDonald's, for all its public image faults, is at least acknowledging the new consumer landscape. Consumers, particularly younger demographics, have for years criticized McDonald's for its lack of diversified food offerings. While until recently McDonald's (and other fast food chains) largely ignored these criticisms, consumers reacted with their wallets—and McDonald's, as well as the fast food industry as a whole, can no longer pretend that the push toward healthier living doesn't exist.
Bob Ciura owns shares of McDonald's. The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of 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.