Hot Picks: McDonald’s beverage push signals restaurant growth shift

Restaurant stocks are adjusting strategies as consumers respond to pricing pressure, health trends and changing menu preferences. Investors are closely watching how brands use beverages, protein offerings and marketing to drive traffic and frequency.

BNN Bloomberg spoke with Jon Tower, equity research analyst at Citi, about how menu innovation, beverage platforms and competitive dynamics are shaping the outlook for major restaurant operators.

Key Takeaways

• Beverage platforms are becoming a critical growth lever as operators target higher margins and expanded daypart occasions.
• Protein innovation, particularly around chicken, is a growing focus as brands refresh menus and respond to health-driven demand shifts.
• Competition in energy and specialty drinks may expand the category overall, benefiting brands with strong customer loyalty.
• Marketing velocity and clearer messaging are increasingly important for driving traffic and same-store sales growth.
• Investors are weighing near-term volatility against longer-term opportunities tied to menu innovation and operational execution.

Read the full transcript below:

ANDREW: Let’s talk restaurants, casual dining and coffee. We’re looking at eating today, starting with McDonald’s. Our guest has it as a top selection and expects a strong fourth quarter driven by new menu items. We’re joined by Jon Tower, equity research analyst at Citi. Thanks very much for joining us.

JON: Hey, thanks for having me, Andy. Hope you’re doing well.

ANDREW: I am indeed. McDonald’s is obviously a reliable blue chip for many investors, with a total return of about 47 per cent over the past five years, though it has lagged the S&P 500 somewhat. You see promise here, particularly with a new emphasis on chicken. How will that help?

JON: Yeah, look, their chicken menu relative to the competitive set has been somewhat bland. They introduced the spicy chicken sandwich a few years back, which worked relatively well. In 2025, they added chicken strips, and you’ve seen those show up in snack wraps. It’s been an okay product, but I don’t think it’s been the home run they were looking for.

I think what you’re going to see in 2026 — perhaps later in the year — is more innovation around grilled chicken, potentially an upgrade to the strips they have now, and possibly a move toward tenders. They did have Chicken Selects back in the day, which worked very well. I also think you’ll see more flavour innovation around toppings.

In test markets across the U.S., they’re also testing wings. I don’t know if that will make its way to the menu. We saw it back in 2013 as a limited-time offer. Could it come back? Maybe.

More interestingly, they’re getting more aggressive in beverages. I wouldn’t be surprised on this earnings call, coming up in about a week, if we hear more colour on the timing of a more robust beverage platform. That could include an expanded coffee offering, but more importantly refreshers and energy drinks. That’s likely something we’ll see sometime in early 2026.

If you step back, prior to the past year and a half or two years, the company didn’t really have its marketing and product-innovation muscle in place the way it does today. From 2016 through the early part of COVID, they were focused on experience-of-the-future remodels in the U.S., spending a lot of energy and capital refreshing the asset base. That came at the expense of some product innovation and marketing.

What we’ve seen over the past 12 months is the company saying it’s found some momentum. They’re putting more energy into product innovation and messaging, understanding that higher-velocity product launches with better marketing drive traffic. That likely leads to more consistent same-store sales and traffic growth in the U.S., and globally, starting this year.

ANDREW: On beverages, they may be moving toward so-called functional beverages or energy drinks. Margins on beverages tend to be quite high, don’t they?

JON: Yeah, they’re better than something like a chicken sandwich. Franchisees look at this from a penny-profit standpoint, and these platforms can generate attractive returns.

It also opens up dayparts where they may be under-indexing today. Take breakfast, for example. Someone coming in for a hot coffee might upgrade by a dollar or two to a cold beverage or energy drink. That broadens who they’re speaking to and likely drives greater frequency over time.

ANDREW: Let’s move on to Dutch Bros. The stock has significantly outperformed Starbucks over the past five years, although it’s down from its highs.

JON: Yeah, the stock’s been under pressure recently. There are a few things going on. It’s been a popular name on both the buy side and sell side, and over-ownership to start the year has been a bit of a headwind.

I don’t think there’s weakness in the underlying business outside of weather, which has affected the entire industry. The bigger fear has been competition. Starbucks recently talked about expanding beverages and getting into energy, and McDonald’s is also becoming more robust in that area.

If you look back, when McDonald’s became more aggressive on premium coffee around 2010 to 2012, it actually helped Starbucks, which was growing rapidly at the time. I think something similar happens here. As larger brands market the category, younger consumers will gravitate back to the brands they love — particularly those offering customizable energy drinks with a broad menu and convenience. Dutch Bros ultimately benefits from that increased attention.

ANDREW: Finally, we’re tight for time, but Chipotle Mexican Grill. The stock has disappointed investors, but you see the potential for a turnaround?

JON: Yeah, I think 2026 is going to be a much better year. You’ll see greater velocity of product news, traffic-driving initiatives and marketing.

There’s a lot of concern around margins in 2026, but I think the story improves. You’ll likely get mixed fourth-quarter results and some softer commentary on the start of the year due to weather, with conservative guidance. But over the course of the year, better product news and marketing should drive traffic back to stores.

ANDREW: Jon, thanks very much for your time. Jon Tower, equity research analyst at Citi.

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This BNN Bloomberg summary and transcript of the Feb. 3, 2026 interview with Jon Tower are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.