With beef prices on the rise, McDonald’s Corporation (NYSE:MCD) has officially decided to remove its Angus Third Pounder burgers from the menu by the middle of next month.
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 Corporation (NYSE:MCD) 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 Corporation (NYSE:MCD) isn’t alone in struggling to offset increased food costs; margins at fast-casual competitor Chipotle Mexican Grill, Inc. (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 Corporation (NYSE:MCD), however, Chipotle Mexican Grill, Inc. (NYSE:CMG) 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 Corporation (NYSE:MCD), 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 Corporation (NYSE:MCD) 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.
The article McDonald’s Burgers Get a Little Less Beefy originally appeared on Fool.com and is written by Steve Symington.
Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald’s. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald’s.
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