Oak Brook, Ill.-based McDonald's [image-nocss] Corp. has cited breakfast business and the introduction of frappes and smoothies for helping the chain score 31 consecutive quarters of same-store sales gains. Dublin, Ohio-based Wendy's recently launched a premium version of fries: hand-cut and sprinkled with sea salt.
While experts say french fry sales are likely to grow as the economy improves, they say consumption is unlikely to return to previous levels.
While some experts see signs of healthier eating, particularly among seniors and children--many are ordering apple slices instead of fries, said the report--others point to the recession. Many consumers have been bypassing $5 combo meals, which typically include fries and a drink, and instead are ordering two sandwiches and a $1 drink from the value menu.
Darren Tristano, executive vice president of Technomic, a Chicago-based restaurant consultancy, said the fates of french fries and the economy are inextricably linked. "As America becomes smarter and more frugal--and even post-recession, these behaviors are continuing--we're focusing less on sides and more on main courses and beverages," he told the newspaper. "The dollar drink is a 'must have'; McDoubles for a dollar is a must. When you're looking at fries for $1.29 to $2, it's likely going to be left behind in many purchases."
McDonald's declined to comment to the Tribune for this story, citing the quiet period leading up to the company's earnings announcement.
The earnings report said that in the United States, "first quarter comparable sales and customer traffic reflect the ongoing demand for McDonald's offerings. Key contributors to the quarter were beverages, including the McCafe lineup, the new Fruit & Maple Oatmeal and featured products including the 20-piece Chicken McNuggets and the Chipotle BBQ Bacon Angus burger."
McDonald's Corp. said first-quarter profit rose 11%, fueled by U.S. demand for coffee and burgers, and predicted further increases in food costs this year, reported Bloomberg. Net income advanced to $1.21 billion, or $1.15 a share, compared to $1.09 billion, or $1 a share.
McDonald's and other restaurant chains are weighing price increases as surging expenses for commodities such as beef, pork and eggs cut into profitability. CFO Peter Bensen said that the company will probably raise prices to help counter the surge in ingredient costs.
During the previous earnings call, McDonald's executives acknowledged that the average check amount has declined in part because customers were ordering fewer combo meals, the Tribune added. Instead, they are picking and choosing their own combination of items and visiting between meals for such items as smoothies.
"This is a category that's been a little bit sleepy for a while," Ken Calwell, chief marketing officer of Wendy's International Inc., told the paper. "Over the last 10 years there have been a lot of new hamburger products that have come out, chicken sandwiches, dairy products, salads, new 99-cent [items]. There's been innovation across the category. But there's been very little, if any, innovation across the french fry area."
Burger King also declined to comment.
The decline in fry sales has strained potato farmers, who have cut production and, in some cases, turned to growing other crops. "The potato industry has been affected by the economy--that's no secret," Don Odiorne of the Idaho Potato Commission told the paper.
French fry sales are expected to improve in 2011 over last year, the report said. Farmers planted more potatoes this year after several years of declines based on increased orders from fast-food chains and other clients, Odiorne added. Now inventories are low enough that there is even concern of a shortage.
Mark Hayden, senior vice president of sales at ConAgra Foods' Lamb Weston unit, said if the industry is innovative, it eventually should return to prerecession levels. "I would argue that if we don't do that, it'll stay pretty constant," he said.
Lamb Weston, which is one of McDonald's primary potato suppliers, recently opened a sweet-potato processing facility. The company has reported sweet-potato sales increases at or above 50% over the past few years. A handful of restaurant chains are launching or testing sweet-potato fries, among them Hardee's, Carl's Jr. and Culver's.
Harry Balzer, chief industry analyst for NPD, said fries are still America's favorite side dish, even if that are no longer the most-ordered food. Hamburgers nabbed that distinction in recent years. "The desire for new is insatiable," Balzer told the paper.
Separately, in a recent national taste test by an independent research firm, consumers said Wendy's new fries taste better than McDonald's fries, Wendy's claimed in a press statement. Specifically, 56% of consumers taking the test chose Wendy's, 39% chose McDonald's and 4% had no preference, it said. Wendy's did not name the research firm in the release.
Wendy's new fries, launched nationally in November 2010, were developed specifically to meet consumers' demand for a better-tasting, higher-quality fry, the chain said. They are made from 100% Russet potatoes and sliced "natural style" with the skin on for additional texture and taste, then cooked in proprietary oil that has 0 grams trans fat per serving. They are finished with a dusting of natural sea salt.
Wendy's fry unit sales were up 16% in December, said the report.
Calwell acknowledged that Wendy's has never had a national reputation for great-tasting fries. A year ago, the company re-engineered its fries and introduced them into all restaurants last November. "We've listened intently to our customers and incorporated their feedback into our products," he said.
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