BTIG analysts conducted channel checks at locations that are participating in the McDonald’s Corp. test of the McPlant sandwich and say the plant-based sandwich, created in partnership with Beyond Meat Inc., isn’t meeting expectations.
“[F]ranchisee sentiment on the sales performance was underwhelming,” wrote analysts led by Peter Saleh in a note.
“Their assessment was that they don’t see enough evidence to support a national rollout in the near future and that lower sales volumes were slowing down service times, as the product was being cooked to order.”
Analysts say the McPlant was designed to be cooked and held for 15 minutes, like other items on the McDonald’s
menu. But the lower sales volume means the item is now being cooked when a customer requests it, which is creating longer wait times at the drive-through.
The test for the McPlant was expanded to 600 locations in the San Francisco Bay Area and Dallas-Ft. Worth area on Feb. 14. At the time of BTIG’s channel checks, the test was six-to-eight weeks into the limited-time offer.
BTIG’s analysis suggests restaurants in the San Francisco Bay Area and Dallas Ft. Worth locations are selling 20 McPlant sandwiches per day, while three to five sandwiches are sold per day in more rural East Texas. In the initial eight-store test, 70 sandwiches were sold per day. For this test, franchisees were expecting 40 to 60 sandwiches sold per day, BTIG said.
“We believe McDonald’s may continue to test and even offer McPlant in higher income, urban markets that appear more receptive to plant-based meat offerings, but a wide-scale launch seems a ways off at this point,” the note said.
Analysts expect both companies to continue to “tweak” both the product and the messaging to gain wide appeal. Feedback BTIG received to Dunkin Brands‘ plant-based sandwich years ago found that it had the most appeal with affluent women customers.
Analysts suggest that the price of the McPlant needs to come down to be more competitive with traditional burgers, and the sustainability benefits should be played up more.
In its most recent earnings report, Beyond Meat
cited the McPlant as one of the recent launches that would boost U.S. sales. The company reported a wider year-over-year loss and a 1% revenue decline. The company’s 2022 revenue outlook fell short of analyst expectations.
BTIG expects that sales growth in the food-service channel could take time as restaurants manage the impact of the ongoing COVID-19 pandemic and seek out efficiencies.
BTIG rates Beyond Meat stock neutral.
Beyond Meat shares have plunged more than 63% over the past year. McDonald’s is up 5.4%. And the benchmark Dow Jones Industrial Average
is up 6.3% for the period.