'Dessert Destination'

Published in CSP Daily News

McDonald's moving beyond pies, shakes, to shake up variety

OAK BROOK, Ill. -- McDonald's is aiming to transform itself into a "dessert destination," moving beyond apple pies and shakes in an effort to plump up sales in a relatively small segment of its business, reported the Chicago Tribune.

"It's just one of those things that fell into our laps as something customers want," Adam Salgado, marketing director with McDonald's USA, told the newspaper. "We're always trying to find ways to address what customers want and, in turn, help us grow our business," he said, describing the latest push as a "renewed focus in offering variety."

McDonald's is also working to reflect different eating patterns, the report said.

Ten years ago, Salgado said, customers might only have had a McFlurry--an ice cream and candy offering--with dinner, but now they're having them with lunch and at other times of the day. For instance, McDonald's sells 20% of its pies at breakfast.

McDonald's, Salgado said, first got a taste of what a smaller, novel dessert could do for sales last summer, when the chain offered a "snack-size" McFlurry with Reese's cups, tied to a movie promotion for Shrek Forever After. He declined to provide specific sales data.

But results were promising enough for the Oak Brook, Ill.-based fast feeder to repackage its shakes in clear cups, adding whipped cream and a cherry, and introduce a small-size shake, at 12 ounces, for the first time earlier this year.

Now, according to the report, it's testing new iterations of its best-selling dessert: pies, first introduced in 1970. The chain recently tested a strawberry creme pie, with a sugar cookie crust and sugar glaze covering strawberry and white cream fillings, and a S'More pie, side-by-side layers of chocolate and marshmallow with a graham cracker crust.

Salgado said McDonald's is evaluating when either would make sense as a limited-time offering, and the chain said it's too soon to say how they might be priced. McDonald's also is testing a chocolate-dipped cone, added the report.

"These are just some examples of things we're looking at," Salgado said, adding that the products under consideration would not require new equipment.

Salgado said the majority of dessert sales are made as add-ons, but that the chain is looking for new items to help drive traffic on their own merits.

The timing seems to be right. Sweet treats have gained ground with consumers during the recession, with food consultancy Technomic estimating that 70% of consumers ate dessert at least once a week during 2010. That's up from 57% in 2007.

"Most people, when the economy is tough, turn to desserts as comfort food and an indulgent way of getting past a tough day or a tough life," Darren Tristano, executive vice president at Chicago-based Technomic, told the Tribune.

Daniel Dahlen, chief development officer at Weber Associates, said that desserts are a relatively small business for McDonald's, but new menu options are more likely prompted by pressure to keep the business moving forward. "When you're McDonald's, you've got to look under every rock," he told the paper. "They need to increase sales every month over month, quarter over quarter."

"In last few years, McDonald's has been doing very well in drawing people to restaurants and drive-thrus at nonpeak hours with snack wraps, beverages," Janney analyst Mark Kalinowski, who estimated that desserts comprise a low-single-digit percentage of the chain's business, told the paper. "So it sounds like McDonald's is saying, 'Hey it's a great way to leverage fixed costs and get more people in our stores at nonpeak hours.'"

Although products like snack wraps, oatmeal and smoothies are also important offerings for these periods, Tristano said desserts are "craveable" and perhaps an easier sell for a group of office workers battling midafternoon doldrums or a few friends looking for a way to cap off a night on the town.