McDonald's New Mighty Wings Strategy: Break Even

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McDonald's Mighty Wings Bone-In Chicken
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By Venessa Wong

There's a chicken wing clearance sale going on at McDonald's (MCD). This week the chain began promoting its Mighty Wings at a new price of $3 for five wings, or about 60¢ each, compared with the original price of $1 per wing. That's a 40 percent discount. At this price, McDonald's will either break even or take a slight loss on the product, according to Nick Setyan, vice president in charge of equity research at Wedbush Securities.

Mighty Wings will be sold at the discounted price "until supply runs out," spokeswoman Lisa McComb wrote in an email.

"They've paid for those wings. If they don't sell it, they would have to eat the entire loss," %VIRTUAL-article-sponsoredlinks%Setyan said in an email. "It's really the only sensible option at this point." McDonald's declined to comment on the profitability of the wings. Even so, Setyan estimates that the new price reduces operating margins on wings by about 10 percentage points.

Disappointing sales left the Golden Arches with roughly 10 million pounds of frozen wings -- about 20 percent of what the chain purchased -- at the end of 2013 after Mighty Wings launched nationally in September.

"The original price point wasn't as competitive as it could have been," according to McComb. Although some consumers found the wings too spicy, the recipe hasn't changed; there's "just more awareness that they have a little kick to them."

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Go Inside The Secret Test Kitchen Where McDonald's Invents New Menu Items
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McDonald's New Mighty Wings Strategy: Break Even

Tucked away at the McDonald's C.O.B. — or Campus Office Building — is the test kitchen, where the fast food chain comes up with all sorts of products.



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The kitchens are up on the top floor on Big Mac Blvd. Yes, McDonald's names all the "streets" in its global headquarters office building.



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Here's what Big Mac Blvd. looks like. Kitchens on the left, cubicles on the right.



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Here we are — the test kitchen is called the Culinary Center.



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It's a bit strange, actually — a McDonald's kitchen encased in glass that's more fitting for a conference room.



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The kitchen has some appropriate reading.


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We met up with Chef Jessica Foust, a nutrition and culinary manager at the test kitchen.



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Judging by the setup, the kitchen was prepped to handle the McWraps and Fish McBites. The box o' fish is the McDonald's latest limited-time offering, hitting locations just in time for Lent.



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It has all the gadgets that a regular McDonald's kitchen would have.



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Like these handheld pumps.



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And the usual cups and shakers.



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There's even a little guide on how to get buns toasted perfectly.



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So we ran through the whole process of making a McWrap — a product that McDonald's is counting on going forward.



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The whole assembly line was set up — simple enough.



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The finished product (well, after we'd taken a bite) — just like you'd see in restaurants.



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We also got to try those Fish McBites, which weren't in stores yet.



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The breading's different from a Filet-O-Fish and it's a totally different experience.



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A lot of people shy away from fast food fish, but it wasn't too bad. We wouldn't go out of our way to order it, though McDonald's Filet-O-Fish lovers might.



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What's Foust's favorite item that never made it into restaurants? A blueberry yogurt ice cream shake, she told us.



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That's not the only kitchen at the McDonald's HQ. There are plenty more running down the side of Big Mac Blvd.



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On the way to another one, we ran into Chef Dan Coudreaut, the executive chef at McDonald's.



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Other chefs were at work too. This one was getting some bacon ready for some unknown project.



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It was a bit of a mess in there, like a scientist's lab, with chefs busy at work with their food.



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There's also the Sensory Evaluation Center, which McDonald's uses to test the new stuff they're experimenting with in order to get the feedback to improve the products.



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It's a key part of product development. In the Difference Test, you evaluate everything from appearance and color to viscosity and flavor.



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The items come through a magic door. We tasted a set of mango pineapple smoothies and each of them were slightly different.



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