McDonald's adds burrito to breakfast menu

McDonald's latest salvo in the fast-food breakfast wars comes in the form of the McSkillet Burrito, its first major morning launch since the McGriddle four years ago.

Fast-food companies as varied as Subway and Taco Bell are entering the fray for the $54 billion a year breakfast market, and Oak Brook-based McDonald's is preparing a new panoply of products.

McDonald's breakfast sales this year are expected to top $8 billion, or 28 percent of all McDonald's sales, according to Technomics Inc., a restaurant consulting and research firm.

McDonald's market share of all U.S. breakfast sales, not just fast-food breakfasts, reached 15 percent this year, according to Technomics.

"I think McDonald's wants the McSkillet to be as big a win as the McGriddle," said Janna Sampson, director of portfolio investments at Oak Brook Investments in Lisle. "McDonald's is launching this in a way they think it will be a big winner."

For about $2.49 each, McSkillet Burrito features scrambled eggs, sausages, potatoes, cheeses, bell peppers, onions and salsa.

As for calorie content, each McSkillet will top 620 calories. McGriddles reach 460 calories and the traditional Egg McMuffin comes in at 300.

"They are huge burritos for the price," said Sampson, a longtime investor in McDonald's shares.

The McSkillet, however, is just part of a strategy that will include more burrito varieties, such as steak, McDonald's executives said. Other southwestern and Mexican tastes are being explored, too.

The chief operating officer for McDonald's USA, Jan Fields, said the company also wants to add more meats and drinks to its breakfast menu.

"Proteins at breakfast clearly are something we are looking at," Fields said in a Webcast.

McDonald's executives also indicated southern-style chicken breakfast biscuits may also get national rollouts, but no timetable was set.

Higher margin drinks such as fruit smoothies, sweet teas and Mexican-style coffees are also being considered, said Darren Tristano, executive vice president of Technomics.

McDonald's is testing specialty coffees, including lattes, caramel cappuccinos and other specialty morning drinks is select locations.

Driven mainly by its premium coffee sales, breakfast sales increased 42 percent in the last five years, McDonald's confirmed on Tuesday. McDonald's coffee sales grew 30 percent in the last 12 months, according to the company.

McDonald's is so successful at breakfast, its breakfast sales match all day sales at Burger King and Wendy's, Tristano said.

Consequently, more fast-food chains want some of the morning market, which is growing at three times the pace of the overall fast-food market, according to industry estimates.

On the West Coast, Jack in the Box has added all-day breakfast options, something McDonald's does not plan to do any time soon, Fields said Tuesday.

Taco Bell and Wendy's are also aggressively pursuing breakfast roll-outs, Tristano said.

Fast-food chains see even more potential for the breakfast market because most Americans still eat at home. If the chains can change that habit, they have a new market to serve.

McDonald's executives spent Tuesday focused on its breakfast offerings but mentioned potential rollouts of non-breakfast products including a three-pound Angus burger and ingredient changes.