McDonald's joins Beyond Meat bandwagon with Canada tests

(Reuters) - McDonald's Corp MCD.N will test a new "plant, lettuce and tomato" sandwich using Beyond Meat BYND.O patties in some restaurants in Canada next week, the company said on Thursday, following major rivals' bets on the plant-based protein mania in North America.

Shares of Beyond Meat jumped 16 percent immediately after the announcement and later pared gains to trade 9 percent higher. The shares have roughly tripled in value since the company’s listing on the stock market in May.

McDonald’s stock was up marginally. The world’s largest burger chain joins Tim Hortons, KFC and Dunkin’ Brands in adding products made with Beyond Meat patties to their menus.

As consumers grow more concerned about health and the impact of industrial animal farming on climate change, the plant-based market is expected to explode to an estimated $140 billion over the next decade, according to Barclays. Beyond Meat, a pioneer of plant-based meat substitutes, is competing with Silicon Valley-based Impossible Foods for dominance of the market.

McDonald’s rival Burger King and Impossible Foods teamed up in April for the U.S. rollout of a plant-based Whopper. The Impossible Burger is also sold at fast food chain White Castle and at Disney theme parks.

“We wish McDonald’s similar success in its 28-unit test in Canada,” Impossible Foods said in an emailed statement. Spokeswoman Jessica Appelgren told Reuters the Impossible Burger has not yet been approved for sale in Canada.

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McDonald’s has not yet indicated if it will launch a U.S. plant-based burger, but there has been intense market speculation on which meatless burger maker McDonald’s could pick.

“(The) Beyond Meat selection is a good way to offset the parity of just going to Burger King for the same patty,” said Tim Powell, a restaurants expert at consulting firm Foodservice IP. “We all have been pushing McDonald’s to make this move...It opens the door to a whole host of new customers.”

Powell warned that setting prices could be a challenge for McDonald’s. Plant-based burgers typically cost $1-$1.50 more than meat patties - a price gap that Beyond Meat and Impossible Foods are investing in closing as soon as possible.

The Incredible Whopper costs $5.59 versus $4.19 for a beef Whopper. McDonald’s said its PLT sandwich - a play on the traditional bacon-filled BLT - would cost C$6.49 plus tax and will be sold in 28 restaurants in southwestern Ontario, Canada starting Monday. This compares to a C$5.69 Quarter Pounder. Burger prices may vary in different stores.

McDonald's has bucked this trend in Germany, where it sells Nestle's NESN.S Incredible Burger - marketed as the Big Vegan - in 1,500 stores for a lower price than it charges for its Hamburger Royal, which is comparable to a U.S. Quarter Pounder. In June, McDonald's began selling the Big Vegan in several Israeli stores.

McDonald’s announcement on Thursday coincided with the highly anticipated launch of Nestle’s plant-based burger in the United States.

“A lot of people have been asking McDonald’s if they are going to do this. I do think to offer the consumer another option is nice, but again, it remains to be seen on what the uptake is,” said Brian Yarbrough, an analyst with Edward Jones.

Yarbrough pointed to Tim Horton’s, owned by Canada’s Restaurant Brands International <QSR.TO, which recently pulled back its own Beyond Meat plant-based burger offering this month, citing the better demand for real beef burgers.

McDonald’s said the 12-week test would allow it learn more about real-world implications of serving the PLT, including customer demand and impact on restaurant operations.

Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru, Richa Naidu in Chicago; editing by Patrick Graham and David Gregorio