NEW YORK (Reuters) - McDonald's Corp MCD.N said on Wednesday it will expand its trial in Canada of vegan burgers made by Beyond Meat BYND.O as the world's biggest fast food chain tests the viability of a broader rollout.
McDonald’s initial 12-week test late last year of its so-called “P.L.T.” burger at 28 locations in Southwestern Ontario will grow to a total of 52 locations on Jan. 14 and run for another three months.
Analysts, rival fast food companies and plant-based protein producers are watching McDonald’s to see whether the P.L.T. is popular enough to justify wider distribution, particularly in the United States, its biggest market.
While other chains have already started selling plant-based meat - including Restaurant Brands International Inc's QSR.TO Burger King, White Castle and Dunkin' Brands Group Inc DNKN.O - a McDonald's contract would likely be the biggest and put the plant-based meat movement front and center in mainstream America.
Reuters reported on Tuesday that Beyond Meat rival Impossible Foods is no longer trying to win a deal with McDonald’s because it does not currently have the capacity to supply the fast food giant.
Beyond Meat shares, which closed up 12.5% on Tuesday after the news, were down 1.4 percent on Wednesday.
ONTARIO TESTING GROUNDS
Graphic designer Jeff McClinchey had not been to a McDonald’s restaurant since 1999. But in the last couple months, McClinchey – a vegetarian – has been twice to eat the P.L.T.
“I liked it. It hit that nostalgic factor,” McClinchey told Reuters while shopping at a comic store in London, Ontario, last month.
A report from the Canadian newspaper Financial Post, citing a McDonald's executive, said the test would help the company determine who is buying the sandwich, but that so far the P.L.T. had the right name and recipe. (bit.ly/2T2QQG5)
McDonald’s confirmed to Reuters that demand for the item was higher in urban areas, and one franchisee with more rural locations opted out of the second phase of the test.
Southwestern Ontario, particularly the city of London and surrounding areas, has long been the “guinea pig of Canada” to test new products, said Gerry McCartney, CEO of the London Chamber of Commerce.
The area, about two hours southwest of Toronto, has the perfect demographic mix as a diverse but hard-to-win market, according to locals and experts interviewed by Reuters.
Traditionally a farming community surrounded by conservative agricultural and industrial areas, it is close to the United States and has an urban core with more liberal pockets.
It has a big university, as well as a number of residents from Europe and other countries, and even boasts Canada’s first 24-hour vegan fast food drive-thru restaurant, called Globally Local.
UBS said in December that McDonald’s could sell more than 250 million P.L.T. sandwiches annually if it rolled out the product across its nearly 14,000 U.S. outlets, based on the Swiss investment bank’s tests that showed McDonald’s was selling nearly 100 burgers a day at some outlets.
Reporting by Praveen Paramasivam in Bengaluru and Hilary Russ in New York; Editing by Maju Samuel and Nick Zieminski