Here’s Why McDonald’s Is Retailing Its Big Mac Sauce
McDonald’s (NYSE:MCD) has been preparing to sell its Big Mac Sauce in grocery stores since last year. In September 2016, the company filed a trademark registration for “Mac Sauce” and in January this year it gave away 10,000 bottles of Big Mac Special Sauce in the U.S. as part of a product promotion. Earlier in 2016, the company released 4,000 bottles of its sauce in Australia as a small retail trial. However, the company now appears to be getting serious about selling its sauces in stores. McDonald’s recently announced that its Big Mac, McChicken, and Filet-O-Fish sauces will be sold in grocery stores across Canada, starting this spring. Several restaurants sell their products in grocery stores, and McDonald’s is joining the club in an attempt to generate an additional source of revenue. The company will be working with Kraftz Heinz to create this product. As the market for condiment sauces continues to grow at a steady rate and demand for McDonald’s products remains high, entering the retail condiment market could generate a fairly substantial revenue stream for the company.
New Revenue Stream
According to Transparency Market Research, the global condiment sauces market will grow at a compound annual growth rate (CAGR) of more than 3% through 2020 and reach an estimated size of nearly $24 billion by 2020. Urbanization is likely to contribute to the growth of this market, but the shifting consumer preferences towards healthier foods made from natural ingredients could hamper the growth opportunity for McDonald’s. The U.S. was the largest market in the world for condiments in 2014 and is likely to retain its number one position over the next few years. An entry into this market would give McDonald’s another steady source of revenue. Given the popularity of the Big Mac and the company’s brand recognition, demand for its sauces will likely be strong.
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The company’s small trial in Australia has been successful, and it is now launching sauces in Canada. While these regional launches can help the company to test the market, for this business to generate a steady revenue stream McDonald’s needs to make it available in the U.S. and other international markets. McDonald’s has a strong consumer base, and the addressable market is likely to see steady growth in the future. Entering this segment can diversify McDonald’s revenue streams, and while its restaurants will remain the key revenue drivers, an additional source of income could boost the company’s valuation in the long term.
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