Where’s the beef? McDonald’s is the biggest burger restaurant in the world, but you wouldn’t have known it from its third-quarter earnings call yesterday. Executives at the fast food giant uttered the b-word a mere six times. Two of the mentions came at the beginning and end of the call when CEO Steve Easterbrook repeated that the company was repositioning itself to be a “modern, progressive burger company.” By comparison, the execs referred to breakfast 17 times and chicken eight times.
The rare mention of the iconic product that has long defined McDonald’s (MCD) is a sign that being a “modern, progressive burger company” might means focusing a lot of attention on…other things.
“I think you’re going to see them become more and more about other things and less about burgers and fries,” says Edward Jones analyst Jack Russo. “They want to be seen as giving people choice and being more healthy.”
If you look at the numbers, it’s clear why. The U.S. public may be burgered-out. There are 50,000 burger restaurants in the U.S.—that’s one for every 6,300 people, according to industry analyst Aaron Allen, who says that Americans eat 46 hamburgers a year on average. Of all the sandwiches sold in the U.S., he says three out of every five are burgers, and more than two-thirds of all the beef we consume comes in the form of a patty on a bun.
Of course, there’s been a surge in at least one category: the ballooning “better burger” segment. Allen found that some 50 national chains—from Shake Shack to Five Guys to Smashburger—have plans to expand, which will add thousands of locations in the coming years. And the proliferation is not just at burger joints. Darren Tristano of industry research firm Technomic says that the burger is also popping up in unexpected places, such as on Olive Garden’s menu or integrated into tacos.
But the pace of growth of the better burger segment is not in line with the growth of burger consumption, which Allen says lags behind population growth. We are already one of the top beef-eating countries in the world. How much more beef can we stomach?
“The only growth is coming from cannibalization,” Allen says. “We’ve capped out on the number of burgers we can eat. They’re really just swapping dollars.” He thinks McDonald’s has taken the biggest hit, noting that if you look at the growth of units added in fast-casual hamburger restaurants in the last three years, that’s approximately equivalent to the number of locations McDonald’s has closed.
The fast-growing chicken sandwich is giving the hamburger a run for its money. According to research firm NPD Group’s Harry Balzer, 2044 will be the year the number of chicken sandwiches consumed at lunch at all chains will surpass burgers for the first time. “Hamburgers are not on a growth cycle,” Balzer says, “but they’ve got a place in our lives.” He says that the chicken sandwich is not cannibalizing from hamburgers; instead it’s a change in how we eat chicken.
Allen, who has done an analysis of McDonald’s menu, says there are now more chicken-related items than anything else on the its menu, and McDonald’s now sells more chicken than beef.
It makes sense if McDonald’s wants to go whole hog on chicken. But McDonald’s can’t forget its roots. As Fortune noted last year in a story detailing McDonald’s woes, the company has a perception problem when it comes to quality:
A survey in Consumer Reports showed that McDonald’s customers ranked its burgers significantly below those of 20 competitors. It also had the lowest rank in food quality of all rated hamburger chains in the Nation’s Restaurant News 2014 Consumer Picks survey. Worse, McDonald’s ratings among diners put the chain at No. 104—on a list of 105 restaurants without table service. (Only Chuck E. Cheese’s scored lower.)
Whether it likes it or not and no matter how much chicken it sells, McDonald’s will always be known first and foremost for the hamburger. That doesn’t mean it has to compete with the better burger chains. It just needs to convince consumers that its burger has gotten better.