McDonald's tests 'popcorn chicken' McBites

Expensive beef prompts creative cooking from the fast-food giant, which is experimenting with less-expensive meats.

By InvestorPlace Apr 27, 2011 9:03AM

investorplace logoImage: Fastfood working (© Creatas/PictureQuest)With rising beef and dairy prices prompting McDonalds Corp. (MCD) to raise menu prices on Big Macs and other offerings, the world's largest fast-food chain is trying to find tasty alternatives for frugal shoppers. 


The latest creation is Chicken McBites, a fried snack that is being billed as crispier than conventional chicken nuggets. The so-called popcorn chicken has been rolled out in Detroit, comes with a variety of dipping sauces and starts at just $1.99.


But will consumers eat them up, or will they see it as a way for McDonald's to cut out meat to beef up margins?


It's not like the McBites plan is incredibly unique. Made from 100% chicken breast meat, McBites look similar to the popcorn chicken Yum Brands (YUM) chain KFC makes. McDonald's is offering the snack with an array of sauces, including sweet chili, creamy ranch, spicy buffalo, honey mustard, sweet and sour, or tangy barbecue.

It's worth noting, too, that McDonald's has made other recent attempts to expand its chicken menu. Late last year, McDonald's began testing spicy chicken sandwiches by introducing Jalapeño Cheddar and Cheddar Onion McChicken varieties in San Diego. The sandwiches are being sold in other markets in California and this week were made available in Texas.


For a business that got its start selling beef burgers, McDonald's actually sells a wider selection of chicken-related entrees, including chicken salads, wraps and premium sandwiches. That has helped it attract health-conscious consumers and rival KFC as the largest restaurant franchise to sell chicken. Now chicken could help McDonald's improve margins, even as food prices increase, because chicken prices, although increasing, remain lower than they were a year ago.


As a result, McDonald's was able to introduce McBites at attractive prices. Sold by weight, McBites are priced at $1.99 per 4-ounce serving, $2.99 for 6 ounces and $4.99 for 12 ounces.  


But whether that's enough to distract customers from higher prices on Big Macs, McCafe and other items remains to be seen. And whether McDonald's can successfully roll out chicken-based items like McBites doesn't change the fact that margins are being squeezed by food inflation across the rest of the menu.


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