Wendy's Gives W Cheeseburger an F, Pulls Plug on Promotion

Midtier Burger Cannibalized Sales of Pricier Items

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Wendy's is no longer going to promote its W cheeseburger nationally.

The W, introduced late last year, was intended to be a midtier burger (originally $2.99 and later raised to $3.19) that would boost profit and sales, priced between the 99-cent menu and the more premium Dave's Hot 'N Juicy burger. Stephen Hare, Wendy's chief financial officer, said during its first-quarter conference call Tuesday that the W burger had not achieved the desired results.

The W was meant to get customers who use the 99-cent menu to trade up, but Wendy's saw the opposite effect, with customers who typically bought the more expensive burgers trading down.

Sales of Dave's Hot n' Juicy (above) were hurt by the W.
Sales of Dave's Hot n' Juicy (above) were hurt by the W.
"The positioning of 'W' clearly was not where it needed to be," Mr. Hare said. "As a result, we will not promote the 'W' again nationally.

"In retrospect the 'W' cheeseburger in December started to show signs of diluting our marketing message and cannibalized some of the success of Dave's Hot 'N Juicy," Mr. Hare said. "Still, we were hopeful that our February promotion of [Hot 'N Juicy] would help us regain our momentum, but unusually intense competitive couponing and discounting negatively impacted our sales growth," he added. Commodity costs, particularly for fresh beef, also affected the chain.

Last year, Wendy's passed Burger King to become the No. 2 burger chain in the U.S. by sales. But first-quarter sales disappointed the company and Wall Street . Although it was the fourth consecutive quarter of positive sales, North American same-store sales were up less than 1%. Comparatively, McDonald's U.S. same-store sales were up 8.9% in the period.

The chain is in what it called a "transition year," part of a turnaround effort that includes modernizing restaurants, introducing new menu items and positioning the brand as better than its fast-food competition and on par with fast-casual chains. Wendy's is also slated to introduce breakfast. It is testing it in select markets but has not provided details on a national rollout.

Last month Wendy's rolled out its new campaign, which carries the tagline "Now that 's better" and features two spokeswomen: the real Wendy Thomas, who promotes the brand, and another redhead, who focuses on product promotion.

"Our marketing messages must improve in impact and relevancy," said President-CEO Emil Brolick. "We know we can't out-shout the competition, so our strategy is not to attempt to play the same game better, it's to play a completely different game." The new campaign is an important step toward achieving that and "smartly challenges consumer food choices and promotes the benefits of choosing Wendy's ," he added.

As for the rest of 2012, "we will continue to leverage the quality positioning in our brand with new innovative twists on our heritage products and return to a few seasonal favorites," said Mr. Brolick. "We have seen that today's consumer is accessing price value in multiple ways and more frequently." He said that the company had recently introduced a "new layer of consumer engagement with a direct-mail coupon strategy designed to reinforce Wendy's brand promise message."

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