Do Wing Execs Fear McDonald's Mighty Wings?
There are rumors that McDonald’s will come out with a national chicken wing offer this summer. The idea that the world’s biggest restaurant chain will suddenly start competing for that growing market while taking a huge bunch of chicken wings off the market has to scare chains like Wingstop, right?
Wrong. Charlie Morrison, CEO at Wingstop, said that the chain’s restaurants in Chicago haven’t seen any impact on sales since McDonald’s began its Mighty Wings test there. Wingstop has about 20 locations in the Windy City. “If they enter the market, that brings awareness to wings,” said Charlie Morrison, Wingstop’s CEO. “If (customers) want quality wings, they’ll swing over the Wingstop.”
We’d be surprised if McDonald’s doesn’t unleash Mighty Wings on the public this year. The company has already said it is planning some chicken promotions, and its test of the wings in Chicago, its hometown, would seem to be a precursor. And the chain could use a buzzworthy limited time offer. Chicken wings would certainly do the trick.
Of course, the rumor is that chicken wings would be a limited time offer, making any impact, well, limited. But there is no question that the entry of the behemoth into the wing market would have a huge impact on the companies that sell wings.
To be sure, chains like KFC have had wings for a while, with seemingly little impact, but McDonald’s is different because it’s the industry’s 500-pound gorilla. In theory, McDonald’s introduction could, as Morrison said, bring publicity to chicken wings that could provide a long-term boost to their business. But it could have a short-term impact on sales, especially when McDonald’s comes out with the wings.
McDonald’s started selling smoothies in July 2010. Jamba Juice, the country’s largest smoothie chain, saw its same-store sales fall 2.7 percent that quarter, and the company blamed the sales decline in part on the sudden competition.
But Jamba has since recovered. Its comp sales grew 3.7 percent in 2011, and its comp sales grew last year, too—they were up 3.9 percent in the third quarter last year, for instance. Other smoothie executives we’ve spoken with have insisted that McDonald’s brought attention to their business with its sheer marketing power.
Sam Ballas, CEO at East Coast Wings & Grill, said there is a difference between what his chain does and what McDonald’s could do. “I’m in the wing business,” he said. “I know what it takes to get a fresh, high quality product to the consumer. I promise you it can’t be done through the drive-thru.”
But what about wing prices? At this point, McDonald’s sells the wings from its chickens on the market. Given how much chicken the company produces, its decision to take those wings off the market would almost certainly drive up prices again during a year they’re expected to ease. We certainly know that purchasers are worried about the impact McDonald’s could have on the wing market.
Wing concepts have experience dealing with the ups and downs of the wing market. Because of their naturally limited supply, coupled with growing demand, few commodities experience the ups and downs of chicken wings. “Our food costs flipped from one of the lowest priced years (in 2011) to one of the highest priced years (in 2012),” Morrison said.
Both Morrison and Ballas said they have good relationships with suppliers and the ability to react to market conditions. Of course, both said they had to take price last year to meet that cost. That price didn’t seem to scare off customers at Wingstop, which reported 13.7-percent same-store sales growth. But there are indications that price increases are wearing on consumers—Buffalo Wild Wings is experiencing traffic declines heading into this year.