Angus Makes McD's Look Classy

Value meals have helped catapult McDonald's (MCD) to megasuccess during this recession, but the company is not content to draw only price-conscious consumers. It wants hungry young men just as badly as Burger King, Taco Bell, and all its other competitors do.

That's why McDonald's invested so heavily in its new Angus burger, which debuts nationwide today. Priced at about $4 and weighing at one-third of a pound (pre-cooked), the burgers are being advertised as "premium" and thus, just like the McCafe, are meant in part to convey the message that McDonald's isn't just a place for broke people to scarf cheap eats.

That, in fact, is the last thing McDonald's wants people to think. Throughout the recession, the company's executives have been baldly lying about the reasons for its burgeoning revenues. And you can't blame them. After all, the recession will end, and when it does, the fast-food purveyors that are offering higher-priced, higher-quality fare will be well positioned to take advantage of the resulting higher margins.

And in the meantime, of course, everyone knows that you can also go to McDonald's to scarf cheap eats.

It's win-win, though not without some risk. The Angus was conceived about two years ago when times were good. According to Bloomberg News, franchisees asked the company for something to help them compete with local burger joints and regional chains that offered higher-quality fare.

But the Angus meant that stores needed some new equipment, at a time when franchisees were already spending big to install McCafes. Then the recession hit.

Further, there is the risk that the Angus will eat into sales of Big Macs and Quarter Pounders, the mainstays of McDonald's offerings to hungry young men with money.

"The Angus is going to upsell someone who would have bought a Big Mac or Quarter Pounder," food consultant Darren Tristano told Bloomberg. "It's less likely to attract new customers than cannibalize existing ones."

Maybe. But it sounds like the Angus burgers, being made from higher-quality beef than the rest of McDonald's burgers, will be far tastier, and, if they're good enough, may well pull customers from other burger shops. The burgers also offer toppings not available on its other burgers: rings of red onions, sautéed mushrooms, full bacon slices and Swiss cheese, all served on a high-quality roll.

And McDonald's says its trials in several U.S. cities showed that such cannibalization didn't occur. And even if it does occur in the national rollout, the margins are higher for the Angus burger, so McDonald's still wins.