Please ensure Javascript is enabled for purposes of website accessibility

Does This Mean McDonald's Corp. Is in More Trouble Than We Thought?

By Rich Duprey - May 17, 2015 at 9:15AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The burger joint is showing additional signs that it is cracking under pressure to reinvent its image and its business.

It wasn't that long ago that McDonald's was mocking restaurants that added trendy ingredients to their menu and vowed its Big Mac would "never be kale." Photo: Elliot via Flickr.

We know McDonald's (MCD 2.02%) is struggling to reinvent itself as a "modern, progressive burger company," in the words of new CEO Steve Easterbrook. One new initiative might indicate it is far more desperate to right the listing ship than we realized.

McDonald's embrace of the so-called superfood kale -- even if in very limited test markets -- shows that the burger joint is willing to grasp any straw (or leaf) in a bid to remain relevant. Yet latching onto kale -- kale! -- shows just how much it doesn't understand its customer, and that bodes ill for turning McDonald's around.

Going green
McDonald's will add the leafy green to several breakfast bowls in nine Southern California markets, according to the Associated Press. Meanwhile, Janney Capital Markets analyst Mark Kalinowski said kale will also appear in Canada in several salads.

No big letter "S" is needed for this superfood, but kale could still be kryptonite for McDonald's. Photo: Mervi Eskelinen.

Kale is called a superfood due to the overload of vitamins and minerals it delivers. Because the deep green vegetable contains high amounts of lutein and zeaxanthin, it is believed it could help reduce the risk of macular degeneration, a leading cause of blindness in the elderly. The American Macular Degeneration Foundation recommends diets that are rich in green leafy vegetables such as kale, spinach, and collard greens.

Kale also contains beta-carotene, calcium, and magnesium, which are thought to support the cardiovascular and immune systems, and more. While the National Institutes of Health says kale and other plants and fruits high in antioxidants could be useful in combating cardiovascular diseases and other illnesses -- and initial studies "are supportive as to the beneficial effects of dietary plants rich in total antioxidants" -- it adds that more research is needed to prove it.

Kale is also high in vitamin K, the so-called "clotting vitamin" for blood. A serving of kale actually has more than six times the recommended daily allowance of the vitamin, which theoretically could pose a problem for those taking blood-thinning medications.

Kale has found its way to the Thanksgiving dinner menu at the White House, and I've even got some growing in my own garden, but McDonald's adding it to breakfast bowls and salads smacks of simply climbing aboard the bandwagon.

While the burger bistro as recently as January was mocking chains that added kale, soy, and quinoa to their menus and vowing the Big Mac "will never be kale," it's clear McDonald's management is eager to be just as trendy (even if kale actually never appears between the Big Mac's buns).

Know thy customer
The customer buying a Big Mac isn't about to make return trips to the restaurant for a bowl of kale, and it's very unlikely that customers who are looking to supplement their diet with the vegetable will be enticed into a McDonald's to get their daily ration.

This also continues McDonald's habit of ignoring its core customer: the lower- and moderate-income family that hasn't benefited from the economic recovery but instead watched its purchasing power erode. They are about as likely to pay $4 for a salad as they are to pay $5 for McDonald's new sirloin burger. They choose McDonald's not for healthy food options or taste, but for convenience and price.

Yet McDonald's is also inflating the prices of the items on its Dollar Menu & More, apparently stressing the "and more" part. Certainly, economics is to blame in part. as the cost of primary ingredients including beef -- and more recently, chicken -- rise, which makes the dollar menu less profitable. The Wall Street Journal reported the Golden Arches is bolstering midprice items that cost between $1.50 and $3 each.

Damned if it does or doesn't
McDonald's admittedly faces a dilemma in which its menu is perceived as unhealthy, but attempts to remake itself into a health food destination still fail. Despite recent efforts at going upscale and looking more like its fast-casual dining counterparts, McDonald's same-store sales continue to fall. Comps tumbled last month for the 14th time in the last 17 months. 

In the end, kale looks like another experiment destined to wilt, carrying with it a whiff of desperation underscoring just how low McDonald's has fallen.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
$247.74 (2.02%) $4.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.