Sep 11, 2019

Popeyes' chicken sandwich and the future of fast food

Dion Rabouin, author of Markets

Illustration: Aïda Amer/Axios

The popularity of the recently unveiled — and more recently shelved — Popeyes chicken sandwich was unlike anything KeyBanc Capital Markets equity research analyst Eric Gonzalez had ever seen.

What it means: For the short time in August that it was available, Gonzalez estimates Popeyes' store traffic doubled and about 1,000 chicken sandwiches were sold in each store every day, accounting for about 30% of total sales.

  • "Just to give you an idea of how much ahead of expectations this was ... a good [limited-time offer] gives you a 2-to-3-point same stores sales lift. You’d take that all day long," Gonzalez tells Axios.
  • "This was 30% of sales. This blew them away, blew away their expectations. And it’s not even on the map. I spoke to a franchisee who said the best he could remember was 15–20% on a crawfish deal in the ‘90s."

Between the lines: The big win was a tribute to the sandwich's great taste and a wildly successful social media campaign that generated $65 million in earned media value in just 2 weeks, according to Apex Marketing Group.

  • Unfortunately, Popeyes has been unable to cash in on that earned media over the past 2 weeks, since the chain managed to sell out of chicken sandwiches in the midst of a mass U.S. oversupply of chicken.
  • Fortunately, the restaurant is at the heart of 2 bullish trends: a growing American appetite for chicken and a roaring fast food sector.

By the numbers: Quick service and fast-casual restaurants — including traditional fast food and pricier chains like Chipotle and Shake Shack — outperformed the S&P by 14% year-to-date through the end of July and by 27% over the last 12 months, note Goldman analysts led by Katherine Fogertey.

  • Americans have been consistently eating more chicken, with U.S. consumers tripling their chicken consumption since 1960, while beef and pork have declined notably.
Expand chart
Data: USDA, National Chicken Council; Chart: Axios Visuals

The big picture: Fast food restaurants have been offering chicken items for years, but the success of Chick-fil-A, which generated $10 billion in total sales last year to become the third most popular fast food chain in the U.S. — and Popeyes' breakout new sandwich — have others looking to add more poultry to their menus.

  • McDonald's and other competitors in the quick-service fast food industry are expected to roll out similar sandwiches starting next month, Gonzalez says.

Be smart: Goldman's research team estimates 70% of the industry's sales growth over the past 5 years can be explained by consumers’ rising wages, lower gas prices and a boost from third-party apps like Grubhub and Uber Eats.

  • High-quality breaded chicken sandwiches could be the industry's new cash cow.

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