Restaurants

McDonald's CEO says he needs to know adding a vegan burger will boost traffic to restaurants

Key Points
  • McDonald's CEO Steve Easterbrook says the company is still trying to figure out who the customer for a vegan burger is.
  • He doesn't think the trend is a fad but isn't yet sure if it will sustain the current buzz.
  • The fast-food chain has been under pressure from consumers as more of its rivals add plant-based options to their menus.
  • In recent months, McDonald's has been scaling back its menu in order to speed up service times.
VIDEO4:0704:07
McDonald's CEO on vegan burgers: We must weigh the demand against the complexity

As pressure mounts on McDonald's to add a vegan burger to its lineup, CEO Steve Easterbrook says consumers should "watch this space."

He likened the decision to add a meat substitute to the menu to its decision to start offering breakfast all day.

"The question is: Will the demand make absorbing it worth the complexity because it will drive the business? We had a similar discussion maybe four years ago about All-Day Breakfast," Easterbrook said on CNBC's "Squawk on the Street."

After being implemented, All-Day Breakfast spurred same-store sales growth for several quarters. But competitors took notice and beefed up their breakfast offerings. Earlier this month, amid its broader push to speed up service, McDonald's said franchisees could trim their All-Day Breakfast offerings.

McDonald's has been under pressure in recent months to add a vegetarian-friendly burger to its menu as more and more of its competition has taken the plunge.

"I don't think it's faddish," he said. "Whether it maintains the same level of buzz is what's interesting."

Its German locations sell a plant-based burger made by food giant Nestle, but McDonald's has said that individual markets decide what is best for their customers.

The plant-based craze also arrives as the Chicago-based company has been trimming its menu to reduce complexity at its restaurants. It has scaled back its late-night offerings and nixed its line of premium burgers.

"When you look at the whole meat-substitute type ideas, I think what will be interesting for us will be to see who is particularly interested in that," Easterbrook said to CNBC's Carl Quintanilla on Wednesday. "Is it an existing customer who just wants an alternative option; does it bring a new customer in?"

McDonald's CEO Steve Easterbrook speaks during a press conference in New York November 17, 2016.
Shannon Stapleton | Reuters

At its annual shareholder meeting Thursday, Silvia Lagnado, the company's global chief marketing officer and director of its menu, said the company is monitoring the plant-based meat alternatives but would not disclose any plans at this time.

In the meantime, McDonald's rivals are benefiting from its lack of action. Restaurant Brands International's Burger King is testing the Impossible Whopper, which is made with the plant-based Impossible Burger. In the pilot, the new offering boosted traffic to locations in the test market by 18.5% in April, according to a report from location data firm inMarket inSights.

McDonald's saw traffic grow last quarter, but like others in the industry, it has struggled to bring customers back to its stores.

"I think across the entire sector, traffic is tight right now, and people are eating out less, would you believe it or not," Easterbrook said.

Some consumers might be displeased with McDonald's lack of vegan options, but investors pushed the stock to a new all-time high last week. In the last year, its stock is up 22%.

VIDEO4:5304:53
McDonald's CEO on consumer confidence and efforts to strengthen traffic