A New Straw For Its Milkshake: Is McDonald’s Focusing On Bizarre Innovations?
As it launches a new Chocolate Shamrock Shake, McDonald’s (NYSE:MCD) is introducing a J-shaped snorkel-like straw which its team of engineers have designed. Aimed specifically at beverages which have two flavors, the straw’s design allows consumers to suck both layers of flavors in one sip. According to McDonald’s, this device required some fairly complex computational fluid dynamics simulations to get the flow right and make sure it works just as well at the bottom of the milkshake as it did on the first sip. While the company is working on technology initiatives to improve the customer experience in its stores, this innovation appears non-traditional. It appears that McDonald’s is looking at innovative ways to drive sales of its milkshakes in the summer. The straw which was launched in an Apple iPhone fashion is likely to attract a significantly large number of curious customers to its stores to try milkshakes. While the company is not launching this at a large scale currently, an innovative tool which improves customer experience can lead to higher spend by customers at its stores. The average spend by a consumer at its stores is a key driver of McDonald’s valuation and we expect this number to grow marginally over our forecast period in the range of $ 3.38 to $ 3.45
There can be a more than 10% upside to our price estimate if this number increases at a rapid pace and reaches $4 by the end of our forecast period.
McDonald’s is working on several initiatives both on the technology and food innovation front to grow revenues. The company hired the same team who worked on Google’s Project Ara to redesign its straws. The product developed by this team is being termed as STRAW (Suction Tube for Reverse Axial Withdrawal) and is the result of months of effort. While it does appear strange that McDonald’s will fund an initiative to redesign the straw, this effort appears to be aimed at a better customer experience and keeping customer interest alive through innovations. Whether this will be a marketing gimmick or a long term way to improve the beverage experience at its stores, remains to be seen.
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