June 10, 2009

Wendy's is adding boneless chicken wings to its menu, the fast-food chain's first new product line since merging with Arby's last year to form Wendy's /Arby's Group Inc.

The boneless wings, which will be introduced nationwide over the next two weeks, are Wendy's first launch by its overhauled product-development pipeline that hopes to spark interest, and, in turn, sales at the chain. The new strategy calls for developing new items that can become menu mainstays rather than promotional items that yield temporary sales pops.

"Consumers see through those things," Ken Calwell, Wendy's chief marketing officer, said in an interview. "What they're looking for are new core products."

Wendy's is getting its wings as competitive pressures in the fast-food arena heat up, especially among the top-three hamburger players. McDonald's Corp. with its newly launched specialty coffee line McCafe, is seen as gaining market share in the economic downturn at the expense of Wendy's and Burger King Holdings Inc. which is pushing its value message harder now to stem traffic declines. Yum Brands Inc. is also trying to reinvigorate its KFC brand with a new grilled chicken product.

That competition has held back Wendy's shares, which closed Monday at US$4.10 a share, down 17 percent for the year although up more than 55 percent since hitting a 52-week low in October.

Calwell said Wendy's new product pipeline is as deep as it has ever been, but it is just one part of a "comprehensive turnaround" of a brand that had struggled to grow sales and profits since its iconic founder Dave Thomas passed away in 2002. The new ownership group, led by Chief Executive Roland Smith, is closely focused on improving annual earnings before interest, taxes, depreciation and amortization by US$160 million through improving margins at Wendy's and reducing corporate overhead across both brands. The chain also plans to improve menu items like its french fries and burger buns.

The chain's value menu has helped attract cost-conscious consumers during the downturn. Same-store sales rose 1.6 percent in Wendy's recent quarter, excluding the impact of fewer locations serving breakfast, which it is in the midst of overhauling.

The boneless wings are seen as coming in at a premium-pricing level, being offered for a suggested price of US$3.99 for between seven and nine pieces, based on their weight, or US$5.69 as a combo. The launch will be backed with national advertising starting June 22, which will emphasize the "sweet & spicy Asian" version of the wings, which tested better in four test markets. They will also be available in "bold buffalo" and "honey barbecue" varieties.