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Let the plant-based burger wars begin.
McDonald's on Thursday announced testing of the P.L.T., a plant-based burger, in Canada. Rival Burger King is already several steps ahead. It launched its own meatless burger nationwide in August, following the lead of Carl's Jr. and White Castle.
Plant-based burgers from Impossible Foods and Beyond Meat offer fast-food chains the opportunity to attract different customers, including the growing population of consumers looking to reduce their meat intake. Like Burger King, McDonald's will cook veggie burgers on the same grill as meat. Ninety-five percent of customers who have bought a plant-based burger have also bought a beef burger in the last year, according to the NPD Group.
Chris Finazzo, president of Burger King North America, said in August that tests of the Impossible Whopper showed that it drew new customers to the chain. Those consumers typically shop at places like Trader Joe's, Whole Foods and Panera Bread, he said.
In addition to missing out on new customers, McDonald's could be losing business to restaurant chains that offer plant-based burgers, said Edward Jones analyst Brian Yarbrough.
On the flip side, plant-based burgers in the U.S. by McDonald's could put in a dent in Burger King.
"If McDonald's eventually launches in the U.S., it does eat away some at Burger King's first-mover advantage," Yarbrough said.
But a single test in 28 Canadian restaurants is still far from a nationwide or worldwide rollout of the P.L.T. burger, and not all tests or limited-time offers result in permanent menu items.
Tim Hortons, the Canadian coffee chain that's owned by Burger King parent Restaurant Brands International, pulled back from selling Beyond's sausages and burgers in all provinces except British Columbia and Ontario as the limited-time offer expired.
"It makes you wonder if it was really selling through well or what the story was there," Yarbrough said, pointing out that Tim Hortons is also not known for burgers.
Morningstar analyst RJ Hottovy said the Canadian test does not mean much until McDonald's announces U.S.-focused plans for meat alternatives. He's anticipating a plant-based burger test in the U.S. early next year.
Others think McDonald's will be slower to act.
"While we are happy to see MCD consider an entry into the plant-based market, at this point we are not looking for a full blown alternative beef rollout in the U.S. in the near term, primarily for supply chain reasons," Stephens analyst Will Slabaugh wrote in a research note.
Beyond Meat CEO Ethan Brown said in June that the company has the ability to supply the nation's largest fast-food chains, as long as wider distribution is thoughtfully planned.
Slabaugh wrote that he thinks a meatless chicken product made by Tyson Foods — which owns McDonald's chicken nugget processor — is a more likely nationwide launch in either 2020 or 2021. A team of Bernstein analysts led by Sara Senatore said in a research note in June that McDonald's would likely experience a more muted impact on its same-store sales growth if it added a plant-based burger because of how much chicken it sells.
The meatless burger test by McDonald's is also the most recent development in the competition between Impossible and Beyond, which have long insisted their only rivalry is with the meat industry.
Legacy food brands like Nestle — the maker of McDonald's veggie burger in Germany and Israel — and grocery stores' private label brands are also creating their own versions of the plant-based patty. But Impossible and Beyond remain the two most high-profile, with a slew of restaurant deals between the two of them.
Supply constraints likely mean at this point that it would be impossible for either supplier to have enough capacity to sell to both chains at the same time. With 14,000 U.S. restaurants, McDonald's has a little less than double Burger King's total U.S. store count.
McDonald's also has ties to Beyond. Former McDonald's CEO Don Thompson was an early investor in Beyond and sits on the company's board.
If McDonald's moves forward with Beyond as its meatless supplier, customers could choose based on their loyalty to either brand.
Although both companies try to emulate a beef burger as realistically as possible, they use different ingredients. Impossible uses genetically modified soy and heme to mimic meat. The Food and Drug Administration recently approved its use of soy leghemoglobin — its plant-based heme ingredient — as a color additive.
Beyond's plant-based burgers primarily use pea protein, in the hopes of avoiding controversy over genetically modified foods or soy.
Restaurant Brands International CEO Jose Cil has said that customers picked the Impossible Burger over other alternatives in taste tests and focus groups. The research company Mintel has found that the majority of consumers care more about taste than specific ingredients when it comes to plant-based proteins.