McDonald’s Seeks New Sizzle in Its Menu

You won’t find a dish resembling the McPizza or Arch Deluxe, two forgettable flops, in test kitchens at McDonald’s corporate headquarters.

But almost anything else is possible these days, a reflection of the menu shakeup underway at the hamburger giant’s 12,700 U.S. restaurants following years of sluggish results from new products.

Burritos, bratwurst, brownie sundaes, Southern breakfast biscuits--all have emerged recently from 1 McDonald’s Plaza for testing, and more surprises are being cooked up for release soon.

Some could become nationwide staples; others will be strictly regional items or wind up on the food obituary list along with the McLean burger and Big Xtra, the latest casualty.

Regardless of the fate of these dishes, industry experts say the push to innovate is welcome and probably overdue as McDonald’s tries to improve slowing profit growth in the United States.

This is still your father’s McDonald’s, and founder Ray Kroc’s too--Big Macs, Filet-O-Fish and its trademark fries will remain core items for the world’s largest restaurant chain.

But the fast-food bastion is doing much more experimenting than before. The reasons: sluggish sales growth, consumers’ expanding tastes, a new computerized cooking system and rivals that sometimes are quicker to innovate.

“We have seven or eight items that are almost icons,” said Tom Ryan, a senior vice president who heads McDonald’s U.S. menu management. “The point isn’t that these are bad or outdated, it’s that we could use a few more.”

Chain Starts ‘Brand Reinvention Program’

Besides new products introduced at select McDonald’s--including the Grilled McVeggie sandwich, three new chicken sandwiches, Fruit N’ Yogurt Parfait, McFlurry dessert and others--another 40-odd ideas are in various stages of testing, he said.

The quest for hot new products is part of a $400 million “brand reinvention program” kicked off recently by a new McDonald’s advertising slogan: “We love to see you smile.”

The new products haven’t been on the menu long, so it’s too early to say whether customers are wowed. Sales at U.S. McDonald’s restaurants rose 4 percent to $5.1 billion in the July-September period compared with the same quarter a year earlier, but that included business from 174 new restaurants, which skews results.

Still, Ryan said success of such new products as breakfast bagel sandwiches and McShaker Salads in particular confirms the company’s view of its menu as “an untapped engine of growth.”

It hasn’t always been so.

You could stump a trivia expert by asking the name of McDonald’s next blockbuster item after Chicken McNuggets in 1982. Answer: There hasn’t been one.

The company relied on old standbys in the ‘90s to stave off U.S. competitors and become a global powerhouse now boasting 28,000 restaurants in 120 countries.

“McDonald’s has had very little in the way of new products in the last decade--at least new products that have worked,” said analyst Joseph Buckley, who follows the restaurant industry for Bear Stearns.

“Other companies have been more aggressive. Now, over the past two years, McDonald’s has gotten very active too.”

Archrival Burger King developed a new french fry and a Big Mac clone, the Big King, among other items. Wendy’s has scored with a series of limited-time products, the latest the Mozzarella Chicken Supreme sandwich.

Taco Bell has introduced the gordita, the chalupa and new fresh-fried nacho chips, and Pizza Hut and KFC have had a steady stream of new items.

“You can be successful without new products, with superior execution,” said Buckley. “But new products are a way to create interest in the brand

McDonald’s sped up its product moves after restructuring its domestic leadership in July 1997 under then-U.S. operations chief Jack Greenberg, now chairman and chief executive officer. Local testing of products was stepped up, a move endorsed by McDonald’s thousands of franchisees, and senior vice president Ryan, who previously helped expand Pizza Hut’s menu, led the innovation as “new concepts officer.”

First came the bagel sandwich, which Buckley calls McDonald’s best new product in a decade. It began regionally and went nationwide last spring.

The completed installation of the Made For You cooking system in U.S. restaurants this year enabled the company to quicken its pace of new product introductions--a move that could boost profits and help McDonald’s shake a protracted stock slump. The customized system makes preparing products much faster.

McDonald’s officials say they don’t expect to see a new blockbuster, suggesting it may be impossible.

“If we happen to find one, that would be great,” said Alan Feldman, head of McDonald’s U.S. business. “A continuous stream of relevant, compelling new product news--that’s what we’re after.”

Industry-watchers endorse that strategy. “Everybody would like to hit a home run, but it’s a very competitive marketplace,” said Janice Meyer, an analyst for Donaldson, Lufkin & Jenrette. “They’re going for singles and doubles, which at least gets you on base.”

McDonald’s reportedly plans to test two new restaurant concepts, one patterned after a diner and another after a deli, amid studies that show baby boomers trading up to full-service restaurants.

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