McDonald's Is Hoping to Lure Customers Back With ... Kale?

This story has been updated to include McDonald's April sales results, which were released Friday.

NEW YORK (The Street) -- If investors needed a sign that McDonald's (MCD) is getting desperate, this is probably it.

Among the new menu items the struggling burger chain is testing is kale, the leafy vegetable that's a favorite among hipsters and health-food nuts.

Nine McDonald's restaurants in Southern California, historically a prime test spot for new items for the company, are testing breakfast bowls with kale as the headline ingredient. There are two bowl options: a turkey sausage and egg white bowl with kale and spinach, and another one with scrambled egg and chorizo.

The kale strategy is the chain's latest attempt to reverse six consecutive quarters of sales declines in the U.S. The Golden Arches is actually testing several new menu items across the country.

Whether McDonald's loyal clientele is yearning for kale -- or even know what it is -- remains to be seen. Investors so far aren't showing much reaction, and neither are consumers based on the company's April sales. 

McDonald's U.S. sales fell 2.3% in April, in line with consensus forecasts.  Global comparable restaurant sales declined 0.6%, beating estimates for a 1.8% fall, as McDonald's Asia did not perform as bad as feared. 

The stock perked up by about 0.6% in pre-market trading on Friday.

McDonald's, meanwhile, is trying to make the new dishes sound appetizing.

"The breakfast bowls are freshly prepared," said, Lisa McComb, a McDonald's representative. "The turkey sausage bowl begins with freshly grilled egg whites and turkey sausage. Employees then make fresh bruschetta in the restaurant and are using spinach and kale to complete that breakfast bowl."

The chorizo breakfast bowl includes some of McDonald's more traditional fare. Its starts with a hash brown, then eggs are scrambled on the grill and added, and finally the chorizo and cheddar jack cheese and pico de gallo join the mix.

Whether the new dishes are organic is unclear. McComb declined to comment on that.

Interestingly, McDonald's is introducing a dish that's time consuming to make just as it's trying to speed up service. The chain has already removed several items and is focusing on snack wraps and quarter pounders that take less time to prepare.

McDonald's new CEO, Steve Easterbrook, has avoided detailing too much on his plans to enhance ingredient quality. Easterbrook suggested on a May 4 call with analysts that recipes may be tweaked to better address consumer health concerns. But when pushed, Easterbrook was noncommittal on the timing of those recipe changes and what those changes might be.

"Consumers are reframing the conversation around food," Easterbrook said. "We are a wonderfully democratic brand." He also said to "expect changes."

Any new maneuver by McDonald's to dish out healthier fast food would mark an attempt to play catch-up on efforts by smaller competitors.  Burrito and salad bowl king Chipotle (CMG) now offers a menu free of genetically modified organisms, and Panera Bread (PNRA) this week said it will remove 150 artificial ingredients by the end of 2016.

Should McDonald's breakfast bowls become available at hundreds, if not thousands, of U.S. restaurants, they would be doing battle against similar offerings at rival fast food chains. Food bowls, stuffed with proteins, have become a favorite of millennials who want to eat with a fork for fear of greasing up their pricey smarphones.

For one, Chipotle has made an entire business of serving up burrito and salad bowls at lightning speed. In July last year, Yum! Brands' (YUM) Taco Bell division launched nationally its "Cantina Power" menu, consisting of bowls and burritos heavy on the protein and light on the calories.

More recently, Yum! Brands' KFC chain has gotten into the bowl craze. In April, the fried chicken joint introduced chicken and rice bowls. Avoidable in two flavors, sweet and spicy BBQ and zesty Tex Mex, both offerings are priced at $5 and available until May 24.

KFC U.S. was the standout performer for Yum! Brands in the first quarter. The chain posted a 7% same-store sales increase, in large part due to its new chicken and rice bowls.

Meantime, bowls stuffed with kale and sausage are only a small sampling of McDonald's latest efforts to save its sinking U.S. ship. In fact, more tests are likely in the offing as McDonald's refranchises about 3,500 restaurants over the next four years, creating new small-business owners eager to try new menu items to earn a hearty return on their investment. As for existing franchisees, they are already being encouraged to test away.

According to Steve Stratton, a McDonald's franchisee who owns locations in Louisville, Ky., about a year ago McDonald's U.S. President Mike Andres came in to talk to owner/operators to encourage them to develop more local menu items. "He said if you have a Hispanic market and if you think a burrito might work during the regular day part, let's talk", Stratton said in late April.

TheStreet takes a look at several new products now popping up at McDonald's restaurant's beyond kale, or that have surfaced in select markets for a limited time this year.

1. All Sorts of Sweet Pastries.

McDonald's began testing "petite pastries" with raspberry and cream cheese in select San Diego restaurants in March of last year. That test may have sparked interest by franchisees to try another sweet morning treat: McCafe muffins.

McDonald's locations in Michigan last year tested McCafe muffins. Stratton and fellow operators of 99 locations in a region known as "Kentuckiana" drove to Michigan to learn more. After tests in their own markets, Stratton and his fellow operators quickly developed their own McCafe fresh-baked muffins and have been selling them for the past six months.

And in April, restaurants in Southern California were greeted with the return of deep-fried turnovers. Two flavors, cherry and apple, are being sold for 79 cents a piece and will be available all year along. McDonald's had discontinued deep-fried pies back in 1992, replacing them with baked versions to smooth over health concerns. 

McDonald's advances in pastries pits it against Dunkin' Brands (DNKN), which has been no slouch to innovating in the category. For example, Dunkin' made its hearty croissant donut a permanent menu item in February after a successful test last November. Starbucks (SBUX) recently released a s'mores tart, part of a broader initiative by the coffee giant to bolster the quality of its baked goods under its La Boulange line.

2. One Indulgent Frozen Treat.

According to Eater, McDonald's will launch a frozen Twix McFlurry in select markets in Indiana as soon as next week. The frozen, indulgent dessert was previously only available overseas, according to Eater.

If McDonald's wants a piece of the frozen treat business it will find a formidable competitor in Sonic (SONC). The primarily Southern-based fast food chain has had strong success with its "blasts," which are made with ice cream and have flavors such as Snicker's and Butterfinger.

In 2012, Sonic hired a new head chef from Sweden, a former 10-year restaurant entrepreneur with experience working at Campbell Soup (CPB). Prior to his arrival, Sonic had sold soft-serve ice cream in the same fashion as McDonald's and Dairy Queen. The product was essentially ice milk, not real ice cream. The company has since launched, and marketed, its real ice cream shakes and frozen blasts in an array of flavor combinations. Ice cream sales have risen 50% dating back to 2011.

3. Fancier, Gourmet-Style Burgers.

In late April, McDonald's did its best to channel the spirit of "better burger" chains such as Shake Shack (SHAK) and Five Guys by launching three versions of the sirloin third pounder burger. Available nationwide, the burgers are priced at $4.99, and are topped with things such as sautéed mushrooms, cheddar cheese and mustard. The bun resembles a brioche in its buttery taste and shiny exterior.

In the Kentuckiana region, operators developed the premium-priced "Spirit of Kentucky" burger in time for the May 2 Kentucky Derby horse race. The burger, which features a non-alcoholic bourbon-flavored sauce and thick-cut Applewood smoked bacon, launched on Apr. 6 to considerable media coverage, and will be available until May 30. Sauces flavored with bourbon, according to Stratton, are a local favorite in the whiskey capital of the U.S., Kentucky.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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