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The Country's No. 2 Chicken Chain Just Added a New Permanent Menu Item

Motley Fool - Mon Nov 27, 2023

Hot on the heels of surpassing KFC as the United States' second-most popular chicken chain last month, Restaurant Brands International's (NYSE: QSR) Popeyes Louisiana Kitchen is adding a new permanent menu item: chicken wings.

Popeyes diners across the country can now order five varieties of chicken wings, including honey BBQ, roasted garlic parmesan, ghost pepper, sweet 'n spicy, and signature hot. Can this dish fuel Popeyes' momentum further? Let's have a look.

Could wings be Popeyes' chicken sandwich 2.0?

When Popeyes began testing its ghost pepper wings in select locations back in January, it didn't expect such a feverishly positive reaction. Sami Siddiqui, president of Popeyes North America, told CNN the chain initially sold out in two weeks after ordering enough wings for what should have been six weeks of availability. When Popeyes followed by rolling out its sweet 'n spicy wings on a limited basis this summer, he added, they promptly became "the most successful product and results we've seen since the infamous chicken sandwich."

Indeed, the permanent menu addition of Popeyes' wildly popular chicken sandwich back in 2019 helped drive a massive 42% spike in sales late that year. With Popeyes' revenue up a little more than 16% year over year in Restaurant Brands International's latest quarter -- fueled by a combination of new locations and reasonably solid 7% comparable-sales growth -- you can be sure the company is champing at the bit to leverage its now-permanent wings offering in an attempt to replicate that success.

To be clear, though, nobody expects the wings to enjoy quite the same runaway success as Popeyes chicken sandwich. But with their low price point -- at a price of six wings for $5.99 -- they should easily attract the attention of both existing and new customers.

That price is subject to change of course, as it's made possible by a massive plunge in the price of wholesale chicken wings to $1.76 per pound as of August 2023 -- down from a peak of more than $4.30 per pound back in October 2021, when an avian flu outbreak had devastated poultry flocks around the world.

"Game on, Chick-fil-A"

Popeyes is also clearly seizing the opportunity to chip away at competitors' offerings. The chain has taken out billboards next to competitors' and, starting Nov. 27, diners will able to use coupon codes such as OPENSUNDAY (which Chick-fil-A is famously not), STOPWINGS (a play on Wingstop's name), and NOTTHATWILD (a reference to Buffalo Wild Wings) to get a free six-piece order of wings with a $10 minimum purchase.

Still, it has a long way to go to usurp the United States' No. 1 chicken chain, Chick-fil-A, in particular, whose market share vaulted from 38.3% two years ago to 45.5% over the past year, according to Barclays research in October. Popeyes saw its own share of the U.S. market simultaneously decline from 15% to 11.9%. But its relative strength was enough to help Popeyes finally secure the No. 2 spot over Yum Brands' KFC, which saw its market share decline to 11.3% this year from 16.1% in 2022.

When asked about its new No. 2 spot at the recent Scotiabank Back to School Conference, Restaurant Brands International Chair Patrick Doyle responded, "Game on, Chick-fil-A."

"We view this special milestone as an indicator that we're headed in the right direction with much more growth to come," Siddiqui told CNBC on Wednesday.

That should be good news for Popeyes parent Restaurant Brands International, which also operates the Tim Hortons, Burger King, and Firehouse Subs quick-service restaurant chains. Popeyes only represented around 15.7% of RBI's total sales last quarter (versus 62.9% for Burger King, 18.6% for Tim Hortons, and just 2.7% for Firehouse Subs). But it was also growing its sales at a significantly faster year-over-year rate (16.1% compared to 10.3% for Burger King, 9.7% for Tim Hortons, and 6.9% for FirehouseSubs) prior to the permanent wings launch.

With shares of Restaurant Brands International trading roughly flat over the past year, this could prove to be a pivotal moment for investors.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wingstop. The Motley Fool recommends Bank Of Nova Scotia, Barclays Plc, and Restaurant Brands International. The Motley Fool has a disclosure policy.

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