McDonald’s Corp. has a good reason for choosing the eight specific restaurants where it’s testing the McPlant burger, say Credit Suisse analysts.
McDonald’s (NYS:MCD) announced last week that it would bring the menu item to locations in the following cities: Irving and Carrollton, Texas; Cedar Falls, Iowa; Jennings and Lake Charles, La; and El Segundo and Manhattan Beach, Calif.
The sandwich was created through a partnership with Beyond Meat Inc. (NAS:BYND) , with the two companies signing a three-year agreement in February .
“We think McDonald’s wants to see whether McPlant can generate enough volume to merit permanent placement across the country or whether it should limit it to markets where consumers are predisposed to meat substitutes and are willing to pay a premium,” analysts led by Robert Moskow said in a Beyond Meat research note published Tuesday.
Analysts note that the areas chosen have “highly diverse populations with varying incomes.”
“Given the uncertainty of the outcome (and the rather tepid results of the 2019 test in Canada), we have not included national distribution at McDonald’s in our forecast, which we estimate would represent approximately $125 million to Beyond,” Credit Suisse said.
Credit Suisse rates Beyond Meat shares neutral with a $123 price target.
McDonald’s has lately found success with its Famous Orders program, in which the fast-food giant partners with musical acts, including BTS , to create special orders composed of items on the existing menu, including the Big Mac burger and Chicken McNuggets.
In the latest McPlant announcement, McDonald’s says it’s always testing new items, and for this test the company aims to “understand how offering a burger with a plant-based patty impacts the kitchens in our restaurants.”
McDonald’s stock has gained 13.1% to date in 2021. Beyond Meat shares have slumped 14%. And the Dow Jones Industrial Average (DOW:DJIA) has gained 15.9% for the period.