Sylvain Charlebois is dean of the faculty of management and professor in agriculture at Dalhousie University.
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Breakfast is arguably the most important meal of the day. This is certainly true when it comes to business, particularly in the fast-food industry.
Breakfast used to be seen as a low-margin, low-revenue market, but now it's giving some restaurant chains a new life. The latest financial results from McDonald's Corp. show that its all-day breakfast strategy in the United States is paying off.
Given the breakfast market's complete transformation in recent years, it is just a matter of time before Canadians can order their favourite McMuffin throughout the day.
This is quite a turnaround for McDonald's; some store sales are up more than 5 per cent for the third quarter in a row. It is a major contrast from just a few years ago when the company was closing a significant number of restaurants as it tried to redefine its growth strategy by focusing on contemporary market inclinations. It would seem that McDonald's has its groove back with its breakfast menu, following other fast-food chains, such as Taco Bell, in the United States.
The lines between meals are blurring and breakfast's reach is going way beyond the traditional time slot of 7 a.m. to 11 a.m. Thanks to unpredictable work schedules and busy lifestyles, more consumers are looking for breakfast options. They are moving away from breakfast cereals served with milk and buying more ready-to-eat cereal products such as bars and oatmeal, along with yogurt and drinks. It's estimated that close to 20 per cent of breakfasts are now eaten on the go.
As well, breakfast is dirt cheap compared with lunch or dinner at a restaurant. Not surprising, then, that breakfast has become the most transferable meal of the day, or that McDonald's is capitalizing on the trend. What is making its case stronger are demographics. In the United States, the baby boomers are now outnumbered by the millennials, who are known to hate breakfast cereals and like saving money. Such a massive change in the marketplace will leverage McDonald's position. (Once millennials start raising their own families, however, they may end up with different views about breakfast.)
In Canada, McDonald's is likely weighing its options on all-day breakfasts. McDonald's Restaurants of Canada Ltd. has performed well despite woes south of the border. Still, expanding its business hasn't been easy. McDonald's Canada is a $4-billion business with more than 1,400 outlets. The leading chain in Canada remains Tim Hortons Inc., which continues to control the breakfast market. Starbucks Corp., too, is serving a good portion of the morning coffee market.
While Starbucks is exploring the idea of building its after-hour business by selling alcoholic beverages, Tim Hortons remains committed to its strategy. McDonald's Canada, however, can easily capitalize on its aggressive coffee campaign and jazzier stores. Its extension of the McCafé menu, to include baked goods, make its breakfast portfolio more appealing to the refined palate. One would think that the setup is ripe for a change here, but McDonald's is aware that to sell products, it needs supplies.
Some reports suggest that McDonald's Canada is facing some major challenges in its plan to convert to cage-free chickens for its eggs. Costs and the schedule to execute changes at the farming level may have been underestimated. It has given itself 10 years, until 2025, to offer cage-free chicken eggs to consumers. Other chains, such as Tim Hortons, have committed to do the same.
McDonald's currently buys more than 120 million eggs a year in Canada. The all-day breakfast option could increase that number to 150 million, perhaps more, but with our quota-based system, it's complicated. The system here is very different than in the United States, where cage-free eggs are already available.
But once the company figures out how to move past the supply-management question, it's just a matter of time before we get our version of breakfast wars in Canada.