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McDonald's Rolls Out $4 Burger: Why?

With the nation in its deepest recession in decades, why would McDonald's pick this moment to launch a $4 burger?

You may have noticed the signs that just went up on some McDonald's drive-through menus: The new Angus burger. It weighs one-third of a pound. It costs four bucks.

In its first-quarter earnings conference call this morning, the company did not say it is rolling out the Angus nationwide, but it did not say it isn't. The company was cagey.

Still, they're starting to pop up -- The Ticker saw the Angus on a menu last Saturday, at a McDonald's on the road from Washington to Morgantown, W.Va.

An upscale product in this climate? What could the company be thinking?

McDonald's has been more than recession-proof. Indeed, the company's current slogan, "I'm lovin' it!" could be amended to read, "The recession -- I'm lovin' it!"

Last year, McDonald's was one of only a handful of publicly traded companies to show a stock gain on the year.

Today's earnings showed a 4 percent gain in net income for the first quarter, a number that would have been higher had the strong dollar not eaten into sales overseas, where McDonald's gets two-thirds of its revenue.

Analysts say McDonald's -- like Wal-Mart, Dollar General and other discounters -- has benefited from a "trade-down" phenomenon during the recession, as cash-strapped Americans stop eating out at Chili's and start eating out at McDonald's.

So why monkey with success? Why roll out a burger that puts your price-point in-line with Fuddrucker's, Red Robin and other high-end burger joints?

McDonald's has been testing the burger at some restaurants since 2007, franchisees report. The company created this site to promote it.

The Ticker called Stifel Nicolaus vice president Steve West, who covers McDonald's and who actually flew to L.A. a couple of years ago to taste-test the Angus, and reports that it's a good burger.

He had a good answer to the "why?" question, but not the "why now?" question.

Nicolaus said that the McDonald's menu has been upgraded over the past few years everywhere across the board -- chicken strips were added to the McNuggets, real salads were added, breakfasts were expanded, sweet tea was added.

Everywhere, that is, except for burgers.

"McDonald's has not had a good burger upgrade in years," West said. Note he said "good," which clearly does not include the ill-fated McDLT, which came packed in enough styrofoam to wreck two ecosystems.

West pointed out that McDonald's has lagged behind rivals such as Burger King, which has its own Angus, in the upscale-burger market. But that's understandable, he said, because McDonald's has identified four areas where it wants to "win:" breakfast, beverages, chicken and drive-through.

Note that "burgers" is not on that list. For many consumers, a fast-food burger is probably a commodity, unless it's got a little upscale to it.

As for why now, "I'm with you. I don't know why now," he said.

West even pointed out some potential stumbling blocks to the Angus roll-out: The company already is in the middle of an expensive launch, the McCafe gourmet coffee project, which is aimed squarely at Starbucks and Caribou Coffee.

Further, he said, adding a new one-third burger adds "much more complexity to the system," he said. "You have more SKUs [stock-keeping units], more stuff in the freezer, more stuff to track."

So we called Hudson Riehle, vice president of research for the National Restaurant Association, who provided one possible answer to the "why now?" question. And it's a counter-intuitive answer, at that.

Riehle said his group's research shows that in recessions, higher-income families that never would have gone to a quick-service restaurant such as McDonalds's are attracted to premium-priced products -- such as a $4 burger.

In other words, McDonald's may actually get new customers with a $4 burger from burger snobs who would never touch a Big Mac but, in this tight-money times, don't feel like dropping $7 for a gourmet burger elsewhere.

"Premium products at quick-service establishments is definitely a trend of the future," Riehle said.

We shall see. Despite its galactic success in just about everything else over the past 50 years, McDonald's does not have a good track record when it tries to fancy-up its burgers. We'll see if this Angus has legs.

-- Frank Ahrens
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By Frank Ahrens  |  April 22, 2009; 4:55 PM ET
Categories:  The Ticker  | Tags: Dollar General, McDonald's, Starbucks, Wal-Mart  
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Comments

its prolly gross.

Posted by: brandonesque | April 22, 2009 5:05 PM | Report abuse

1/3 lb: now that is disgusting!

Posted by: johng1 | April 22, 2009 5:27 PM | Report abuse

Former DC area resident now in SoCal--we've had the McD's Angus burgers since last summer at least, and they are pretty good burgers. It seems to have acquired staying power here, having launched before the more serious downturn.

So, while it may not be an optimal time to launch a gourmet-ish burger, it's not necessarily a bad time given their current drive to gentrify their image between the coffee and chicken additions, plus Mr. Riehle's hypothesis above.

Posted by: alhuang | April 22, 2009 5:29 PM | Report abuse

So far McDonald's have proven they can run a business very efficiently and successfully unlike anyone currently drawing breath inside the Beltway so I'm going to give them the benefit of the doubt here.

Posted by: relictele | April 22, 2009 5:29 PM | Report abuse

Why can't they put out a turkey burger? They could use that as a way of showing that they are trying to healty. Angus is okay, but you have to be very careful, I had one from Burger King and it was horrible. A Turkey burger would set McD's apart from all of the fast food chains because no one else has one. In fact you can only get a Turkey Burger from Red Robin, Fuddruckers, Fatburger, Friday's and Ruby Tuesdays, no one else sells them.

Posted by: mudd94 | April 22, 2009 5:29 PM | Report abuse

I still don't know why anyone at all would want to eat at any of these reataurant since cooking meals yourself turns out to be cheaper and healtier in the long run.
Still, if you must eat at a restaurant like McDonalds then you must. I just thought McDonalds was trying to actually put healtier foods on their menu, the Angus burger seems like a step back from that and more in line with Burger King and their gross, hugely oversizzed, burgers and sandwichs. How soon till any of these places need to replace their doors with slightly larger ones!? I'm sry if the dollar menus at these places are the only thing you can do, moneys tight, I get it, I still think it's cheaper, cheaper than the dollar menu even, to cook your own food. I know it's definatly healthier. So many lazy fat arses out their, should be ashamed of themselves if you can't cook, or donl;t have the time to cook! If you take out the tons of bags of chips and liters of soda out of your grocery shopping list (not to mention cookies!), not only would have more money to spend on fruit, vegatables and fresh meats, but you would lose weight too!

Posted by: ai3di | April 22, 2009 5:31 PM | Report abuse

People like affordable luxuries. Maybe they can't have their dream home or dream car, but they can afford a $4 burger, a $2 cup of coffee, or a $1 bottle of water. To them, they are living high.

Posted by: Bitter_Bill | April 22, 2009 5:41 PM | Report abuse

Is there actual Angus meat in this burger? Is the texture similar to a 'real' burger, or a McD's burger?

Posted by: Michael_A1 | April 22, 2009 5:41 PM | Report abuse

I live in SoCal, too, and have eaten the Angusburger, specifically the mushroom and swiss cheese version, three times in the past year.

They are definitely better than the original burger, but like any fast food burger, it seems to me, when it cools off, it is not tasty anymore. So eat fast and eat half. (It's huge, so half is enough in any case.)

Posted by: CarolineC | April 22, 2009 5:54 PM | Report abuse

would you like kickass fries with that scro?

Posted by: johng1 | April 22, 2009 5:57 PM | Report abuse

ai3di, you are probably right, however, most folks who goto McD's are going there because they feel like they don't have time to cook those meals by themselves. We live in a society that is almost open 24hrs and because of that folks grab whatever they can get the quickest. Think about it, It takes about 30 minutes to make a well done hamburger and about 20 - 30 minutes to make french fries(even more if you pat out your own patties and cut your own fries). Couple that with working 10 hours a day, dealing with daycare, and driving home. You see my point?

And it's not just Mcd's it all of the other places out there.

The only place that is somewhat healthy is Chik-fil-a and that is because they try to make their food as healthy as possible. Even the fried chicken sandwitch has less calories than the same sandwitch at other resturants.


But you've gotta ask yourself, why do people go out to eat, because they want to get something that they can't get at home. For whatever reason eating a burger at Mcd's is different than eating a burger made at home. Even it you by buns, frozen patties, etc. the burger made at home is not the same. Whether or not you like one over the other is relative but they aren't the same.

Posted by: mudd94 | April 22, 2009 5:57 PM | Report abuse

I can't believe how elitist I've become when I scoff at a $4 burger as being upscale and a $7 burger as gourmet.

Are people going to start picketing my house?

As for McDonalds, B King and the rest of that processed slop; thanks but no thanks. Those cattle are abused at best and cut up in the worst slaughterhouses in the country. Any meat from these types of places isn't fit for consumption in other nations. I prefer my burgers to be poop free.

Posted by: theobserver4 | April 22, 2009 6:00 PM | Report abuse

McDonald's is missing the boat: they need a bacon cheeseburger and hot dogs.

Posted by: kwright1 | April 22, 2009 6:04 PM | Report abuse

Funny the article says McDonald's is trying to compete with Red Robin. Last time I checked, you can't get a $4 burger at Red Robin. Another niche filled by McDonald's, good for them.

Posted by: saralorenz | April 22, 2009 6:13 PM | Report abuse

The apple pies are the only thing worthy at Mikyds', the fish sandwich is also acceptable.

Posted by: zosodave | April 22, 2009 6:20 PM | Report abuse

theObserver4 is right. Micky D's needs an Angus Bacon Cheeseburger. And they need to cook their burgers like Burger King. Hmm, maybe they just need to open a Burger King near me. After all, after the stock market bust, I don't have enough money to retire, so I've got to clog those coronary arteries as fast as I can.

Posted by: Charles_Day@comcast.net | April 22, 2009 6:22 PM | Report abuse

An upscale burger would be organic/free range ground veal with sottocenere cheese with black truffles in it. So a $4 burger at McD's isn't really gonna lure me in.

Posted by: jeffcoud1 | April 22, 2009 6:27 PM | Report abuse

Why would McD's do that when the customer service lately has been so crummy? I have been in a line of cars waiting and waiting at the All Saints Road location in Laurel -- for something like 10 minutes between orders!

Today I went to one in the (former) Obama Transition HQ building in Northwest, and there were just two people working there; a dozen orders were stacking up.

Is Mickey D's going to go the way of Circuit City????

Posted by: bs2004 | April 22, 2009 6:42 PM | Report abuse

I totally agree with johng1, ai3di and mudd94. McDonald's puts out these ads promoting this fun atmosphere and these products that put a smile on everyone's face. Truth is, McDs and the consumers are lying to themselves. It's a community of execs who know that the American people are too weak and too addicted to these fatty greasy foods with way too much fat and calories. And yes, it is totally cheaper to shop and cook. Hey McDonald's, how bout you stop acting like a salad or a snack wrap makes your establishment healthy. They shouldn't even be able to advertise for promoting a healthy alternative. Get rid of the grease and move to the garden!

Posted by: fanofpost | April 22, 2009 6:44 PM | Report abuse

When the bean-slicer and marketing BS boyz bite into the burger-chain business, there is trouble ahead. --- Why don't they create a special discount card and collect tons of useless data, so the BS boyz can create a lot of useless reports to confuse top management with the ongoing data blast of tiny details. No way to run a railroad...

Posted by: isenberg888 | April 22, 2009 7:24 PM | Report abuse


Well, they are good that's why.

Duh.

Posted by: j9zig1 | April 22, 2009 7:37 PM | Report abuse


Recession, Depression, doesn't matter. We're an embarrassingly obese nation that cannot be denied of our 4 hours of TV each night, and of course -- we can never be denied our big, artery-clogging burgers regardless of cost.

Posted by: jdmueh | April 22, 2009 7:38 PM | Report abuse

When was the last time the author went to Red Robin? You can barely get a soda pop for $4! The last time a burger there was $4 was... well... maybe never.

Posted by: rah62 | April 22, 2009 7:39 PM | Report abuse

Yeah, everything costs 3x what it cost 10 years ago.
4 dollars today is worth about 75 cents from 10 years ago.

If McDonald's makes the burger it won't be that good.

Posted by: blakesouthwood | April 22, 2009 7:45 PM | Report abuse

$4 burger is probably half what you'd pay at Red Robin and Fuddruckers. I'm sure it will be as good or better. Don't forget the customers decide what's on the menu, by purchasing it. If they don't, it will be gone. You can't force people to buy what you might think they should buy. McD's will sell what people want, and deliver it faster, cheaper, and more conveniently than anyone else. As far as "healthy" food, people scoff at eating a 540 calorie Big Mac while they sit there eating a 640 calorie caesar salad, a 900 calorie chef salad, or a 1200 calorie cobb salad. Peace!

Posted by: swizzlestick | April 22, 2009 7:56 PM | Report abuse

According to the web site, the things look f@cking delicious--and there is a bacon cheese model. But I'm sure once the immigrant gets done slopping it together and throwing it in your bag, it won't look anything like the pictures. Nothing from McD's ever does.

Posted by: woody2471 | April 22, 2009 8:02 PM | Report abuse

Why Not?
Do really think McDonald's is going bust selling a $4 hamburger. What a stupid article

Posted by: kathymac1 | April 22, 2009 8:11 PM | Report abuse

Excuse, me, this is not a gourmet burger and it's half the price of places like Round Robin so not comparable. I'd say it's there for the guys that commonly buy two 1/4 pounders, it's cheaper when you think of that. And yes, the people that usually don't eat at McDs may think that burger will actually taste good.

Personally i'm afraid to try it because it's a gross amount of meat and everything else at McDs is pretty awful. I go to McDs maybe twice a year and get a Big Mac, childhood back to haunt me. I also regret it every time I do because it makes me feel physically ill afterward. Not to mention the fries that used to be so good suck since they changed the oil.

Posted by: datdamwuf2 | April 22, 2009 8:15 PM | Report abuse

We've had McD angus burgers in Morgantown for a while. They are pretty good, but not worth more than $4. That said--it's hard to beat Sheetz.

Posted by: swmuva | April 22, 2009 8:22 PM | Report abuse

I think that having a $4 burger is a good idea, marketing-wise, as everything else on the menu will look so much cheaper.

Posted by: shadows1 | April 22, 2009 8:23 PM | Report abuse

Seeing an article like this in the Economy Watch section makes me realize that economist, especially leftist economists, are idiots. Why would McDs do this? Probably to take money out of American's grocery budget which will cause more American children to starve to death. Damn evil corporations.

Posted by: rpatoh | April 22, 2009 8:26 PM | Report abuse

Who cares?

Posted by: kitzdakat | April 22, 2009 8:32 PM | Report abuse

Here in Floriduh I can buy a pound of locally-raised Angus ground beef for around $2. Charcoal for cooking, maybe 25 cents. Bun, onions and lettuce, another quarter. I use a chimney firestarter instead of lighter fluid, and a fifty cent local newspaper, thin though it is, will start 20+ fires. So... um... 1/2 pound, medium-rare burgers cooked over real charcoal, less than $2 each.

And then we have Council's, an old-fashioned bar & grill (with pool tables) in downtown Bradenton, where a sign reads, "We were making burgers when McDonald still had a farm," and I can get a WAY better than McDs burger (made fresh to order), fries, and a beer (McDonald's ain't got beer -- or pool tables) for under $5.

Or the Shake Pit on Manatee Avenue, which has been serving fine burgers, hot dogs, soft ice cream, shakes, malts and GREAT onion rings since cars had tail fins.

We don't care about McDonald's around here. Why should we?

This is Robin 'Roblimo' Miller, reporting live from Bradenton, Floriduh, "The Land That Time Forgot."

-30-

Posted by: roblimo | April 22, 2009 8:50 PM | Report abuse

"Analysts say McDonald's -- like Wal-Mart, Dollar General and other discounters -- has benefited from a "trade-down" phenomenon during the recession, as cash-strapped Americans stop eating out at Chili's and start eating out at McDonald's."

Talk about jumping out of the pan and into the fire. I cannot remember the last time I had a McDonald's burger. If I need a quick bite, Chipotle or Quiznos is my go to stop.

Posted by: jabreal00 | April 22, 2009 8:54 PM | Report abuse

They've sold the Angus in NYC for some time now. I have no use for it.

Their steak & cheese bagel is something else though. The meat falls apart when you bite into it, but I know it started out as grizzle. America is unlike anything that ever was or ever will be.

Posted by: blasmaic | April 22, 2009 9:01 PM | Report abuse

The Angus Third-Pounder has been available around me (~90 miles north of NYC) for months now. It's not the world's greatest burger, but as far as fast food burgers go, it's pretty good.

The author clearly doesn't understand competition. Why would McDonald's try to compete with Red Robin, etc.? Why not? Market share is the key to business. McDonald's is fighting against sit-down restaurants just as much as it is against Wendy's, Burger King, et al.

The difference, of course, is that McDonald's doesn't have waitstaff, their food doesn't take 30 minutes to get to you from the time you order, and they don't make money on "drink" sales. A burger might cost you $4 at any number of food vendors. The difference is the atmosphere and the speed of service. If I want to sit down with family, I'll either visit a Red Robin (or a similar restaurant) or grill out myself. If I want a quick burger, I'll visit McDonald's (or a similar fast food place). All deluxe burgers are not created equal.

Posted by: mbmclaughlin | April 22, 2009 9:05 PM | Report abuse

It is designed to appeal to the right wing
christian crowd who confuse it with
Agnus Dei, Lamb of God...you know the nuts who like to talk about the "blood of the lamb"...
So you pay extra for a Godburger...

I forget the difference between transubstantiation and consubstatiation,
but maybe you know

Posted by: Sanabitur | April 22, 2009 9:07 PM | Report abuse

go veg!

Posted by: sr_1945 | April 22, 2009 9:46 PM | Report abuse

O Agnus beef, you take away the sins of the world, grant us a piece! Haleluuuuia alleluuuuia aleluuuuuuuuuuuuuuuuuuuiiiia.

Posted by: johng1 | April 22, 2009 9:48 PM | Report abuse

A $4.00 Burger is a better buy than a copy of the Washington Compost. Oh and then there's the fact that it tastes good.

Frankie if your still upset by this and have McDonalds stock how about you take it up at the next stock holder meeting?

Posted by: billyrichbroker | April 23, 2009 1:32 PM | Report abuse

BURGER KING has the Angus burger (called the"Steakhouse" burger), and is now introducing the XT (Extra Thick) in limited markets.

On another note, if nobody ever eats at McDonalds, then why do they sell billions of sandwiches every year?

I guess it's like Yogi Berra Said: "Nobody goes there any more. It's too busy."

Posted by: strott | April 23, 2009 4:02 PM | Report abuse

McDonalds is one of the few corps that has made money and employs more during this recession... The Washington Post has not and you have the arrogant ignorance to criticize McDonalds? wanna talk track record FRANK AHRENS ? I will put up the $$$ track record of McDonalds agains the Post, you or any other econ guys

Posted by: jackfish | April 24, 2009 9:06 AM | Report abuse

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