America’s favorite hamburger restaurants like McDonalds (MCD) and Shake Shack (SHAK) might have to pass on higher beef prices to their burger-loving customers. Due to an ongoing protein shortage in Asia — and an expected smaller cow herd in the U.S. in 2020 — beef prices are expected to rise as demand also increases.
The price of beef trimmings is expected to rise almost 15%, according to Telsey Advisory Group’s recent analysis.
Fast food chains and consumers should worry about commodity inflation, according to Yahoo Finance’s Heidi Chung. “That [commodity inflation] puts a real big pressure on margins for a lot of these companies, and in turn, that means they might have to raise prices for the products that they're selling consumers. So this is something that consumers should also be thinking about as we go into 2020,” she said on “The First Trade.”
In Shake Shack’s most recent earnings call, the restaurant chain warned that it’s keeping an eye on beef prices and how they could affect its Q4 and 2020 outlook. Shake Shack has already seen beef prices rise since the third quarter and anticipates they could continue going up into 2020. Chipotle’s Chief Financial Officer Jack Hartung also noted the company is watching the price of beef in 2020.
From beef to plant-based
As the plant-based alternative space heats up, hamburger restaurants could look to this sector for a solution. Beyond Meat (BYND) is currently being served at big name restaurants like TGIFridays, Bareburger, Carl’s Jr., and Dunkin’ (DNKN). If Impossible Foods makes more headway in the space, Beyond Meat may have to step it up as the area becomes more crowded.
“If competitor Impossible Foods comes into the space and we have bigger companies like Nestle (NSRGY) and Tyson (TSN) looking to also get in the plant-based-meat craze, that could also put pressure on Beyond Meat. So pay attention to plant-based meat. It's not going anywhere anytime soon,” said Chung.