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Wendy's readies to enter QSR premium burger war
August 6, 2009
Wendy's is preparing to enter a candidate into the premium burger war with a new cheeseburger launch later this year, Wendy's/Arby's Group CEO Roland Smith said in the company's recent earnings call.
"The new Bacon Deluxe will feature juicier beef, an improved bun, bacon cooked from scratch in our stores and improved packaging," Smith said. "We believe this great new cheeseburger will strengthen Wendy's position as having the best tasting and highest quality hamburger in the QSR universe."
Smith said its new lead creative agency Kaplan Thaler Group has started to work on the advertising campaign to launch the Bacon Deluxe in the fourth quarter.
Wendy's will join top QSR brands McDonald's and Burger King in the premium burger fight.
McDonald's recently launched its Angus Third Pounder line, a product it has tested for two years. The Angus burgers feature a third-pound, 100 percent Angus beef patty and fresh ingredients on a toasted bakery-style sesame seed roll.
Burger King also has been rolling out its new Steakhouse XT line in stores that have upgraded to the new flexible broiler ovens. The Steakhouse XT burgers feature an extra-thick 100 percent Angus beef patty.Burger King also has featured the Angry Whopper, with hot onions, jalapenosand pepper jack cheese.
Wendy's Bacon Deluxe will join the chain's Baconator, which features six strips of hickory smoked bacon, two quarter-pound from-fresh beef patties, two slices of American cheese, mayonnaise and ketchup,
Wendy's has been improving its research and development process and has been testing a record number of other potential menu items, with its Boneless Wings the first of a number of innovative products to result from that retooling.
Viability of premium
When analysts on the earnings call questioned the wisdom of promoting two premium products — the upcoming Bacon Deluxe and the new Boneless Wings — Smith said Wendy's is meeting consumers' desire for high quality by affordable fast food.
"Clearly they want it at a great value, and value is relative," he said. "I don't think all value is defined by $1 price points. We do believe we need to be able to speak to a variety of customers."
Smith cited the popularity of the chain's Boneless Wings launch, which at $3.99 proves to be perceived as a value for the premium product. "There are a significant number of customers out there that if you price things at what they consider to be a value, which doesn't have to be $1, and the product is great and the advertising is motivating and the experience in the store is meeting or exceeding their expectations, they will come and visit you."
Smith also said the company is encouraged by postive consumer response to the Bacon Deluxe in test markets and anticipates a strong fourth quarter.
"Having eaten our new Deluxe, I can tell you it is a fabulous product," he said. "The improvements we have made are significant and meaningful. The customer reaction has been significant. It has been tested in a number of markets now, and it is doing quite well."
Pushing premium may be a struggle in the current economy, although other QSRs have had varied results. McDonald's has expressed confidence in its Angus burgers, while Burger King switched its marketing from its premium products to its value line earlier this summer and plans to continue that focus through the fall. Carl's Jr.'s same-store sales have continued to trend in the negative since the first of the year, but executives there blame the economy and a drop in combo and add-on sales, not its premium burgers, for the dip.Regional chains Carl's Jr. and Hardee's have offered third-pound premium burgers for several years.
Arby's premium/value strategy
Wendy's sister chain Arby's also is focusing on the value of premium offerings, Smith said in the earnings call. The chain said the mix of value and premium was strong in July when the chain promoted its new BBQ Roastburger with fries and drink for $5. Next, Arby's plans to introduce a new everyday value program in the fourth quarter that features one of five full-size sandwiches with a fry and a drink for $5.
"At Arby's we continue to focus on increasing visit frequency of our medium Arby's customers which represent about 50 percent of our revenue," Smith said. "One additional visit each year from this target generates a 3 percent same-store sales increase. To attract this target we will continue to focus on both premium roast beef sandwiches and every day value."
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