Will McDonald's Wreck The Wing Market?


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In a note this morning following meetings with McDonald’s executives, Goldman Sachs analyst Michael Kelter said that McDonald’s national launch of “Mighty Wings” may be on the horizon, effectively confirming the worst fears of every chicken wing buyer in the United States.

Chicken wing prices are at record levels and are so bad that some buyers can’t even hedge their contracts this year. McDonald’s could hurt the market even further if it decides to start selling chicken wings itself, yet the Chicago-based QSR giant is in a unique position because it wouldn’t actually pay those higher prices.

McDonald’s produces its own chickens. The company then sells chicken wings because it doesn’t use them. Thus, it would simply need to stop selling those wings and sell them in their own stores.

That would pull a huge amount of supply off the market, invariably driving wing prices even further. And don’t think it won’t, either: because their supply is so restricted, chicken wings are highly sensitive to supply and demand swings.

On their recent conference call, McDonald’s executives gave only vague hints to a potential Mighty Wings launch, noting that they plan to focus more heavily on new products this year, including the upcoming launch of “Fish McBites” along with “chicken entrees,” among other things. That may not necessarily mean Mighty Wings this year, but Kelter said there is a “high likelihood” of a future launch of Mighty Wings.

He noted that the company is testing the product in Chicago, its high-profile home market. And management served the product to investors at a meeting this week.

Whether this helps McDonald’s is another matter, though the company is famous for its rigorous product tests, and its new products in recent years have generally worked out well. Its wing introduction probably won’t take customers away from Wingstop or Buffalo Wild Wings, but it sure would hurt those companies’ bottom lines.

 

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