Restaurant Brands International Isn’t the Only Winner of the Chicken Wars

The “chicken wars,” an industry-created battle to build a better-tasting fried chicken sandwich, features two of the fast food industry’s heaviest hitters. While it’s true that privately held Chick-fil-A still leads the category, and Wendy’s (NASDAQ:WEN) claims a place, most of the press releases come from YUM Brands’ (NYSE:YUM) Kentucky Fried Chicken chain and Restaurant Brands International’s (NYSE:QSR) Popeye’s.

QSR Stock Isn't the Only Winner of the Chicken Wars

Source: Tony Prato /

Restaurant Brands International, controlled by Brazil’s 3G Capital, got things rolling in 2017. It paid $1.8 billion for Popeye’s, billed as “Louisiana cuisine” but named for the cartoon sailor. The move helped power QSR stock higher shortly after.

At the time Popeye’s focused on biscuits and on-the-bone chicken. The story of the purchase at an industry magazine foreshadowed a change, a shrimp plate with tartar sauce.

The QSR Coup

The Brazilians began working on their new sandwich almost as soon as the ink dried on the purchase. It began rolling out last summer. The chicken had a buttermilk batter, and the same butter that coated its biscuits topped the bun. (I’ve been using a buttermilk marinade for years.)

The real secret wasn’t the sandwich itself. It was the social media campaign launched around the product. The campaign cost $23 million, called out Chick-fil-A by name, and drew $65 million in free media. The product also sold out in two weeks. Within a month, awareness of the brand jumped 50%, and QSR stock benefited.

This has proven vital through the pandemic. Sales at Tim Horton’s, the coffee chain Restaurant Brands bought in 2014 for $11.4 billion, were down 20-40% year over year. Those at its Burger King chain are still down. But Popeye’s traffic has kept growing. Comparable sales were up 26% in the March quarter.

The Yum Battle

This has caught Yum flat-footed. The Louisville-based company had pioneered social media buzz at its Taco Bell chain. Now, according to Placer.AI, Popeye’s is beating it. Chick-fil-A is still far-and-away the leader in visits, according to Placer.

But the market is starting to sense a problem. Over the last month QSR stock is up almost 18%, outpacing Yum’s gain of 13%. While Yum is worth two-thirds more than QSR, $28 billion vs. $17 billion, the two group’s sales are now nearly identical, and QSR has the momentum. What’s keeping YUM ahead is the relative strength of Taco Bell against the weakness of Tim Horton’s, which is getting killed as people work from home.

The rising cost of chicken is creating a sense of urgency. It’s traditionally a much cheaper protein than beef, because chickens are more efficient at turning grain into meat. But the pandemic has caused havoc at processing plants. The days of cheap chicken are over. The answer is to create chicken sandwiches worth the $4-5 of premium fast food hamburgers.

The result is a new sandwich KFC is testing in Orlando and could roll out nationwide within months. It’s double-breaded, the bun is buttered, and the pickle slices are thicker. To increase the buzz, the first testers are front-line hospital workers.

The Bottom Line on QSR Stock

The big chains’ chicken sandwich wars are a welcome distraction during the novel coronavirus summer.

But there’s a serious side to all this. Restaurant Brands is compensating for Canadian weakness with Louisiana spices. Yum is protecting its flank in a market share war it began with Taco Bell. All sides are fighting rising costs.

Both chains are due to report their June quarters at the end of July. Restaurant Brands is expected to have 28 cents per share of earnings on sales of $985 million. Yum is expecting 46 cents per share of earnings on revenue of $1.15 billion.

The winners in the chicken wars are stockholders in both companies.

Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in QSR.

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