Commentary

Lots of Lovely Ideas For McDonald's, Whose Global Sales Slipped 1.8%

With McDonald’s announcing yesterday that its quarterly same-store sales were down an even-worse-than-expected 1.8% globally, there’s no shortage of advice out there in the IMHOsphere for incoming CEO Steve Easterbrook from academics, marketing experts and just plain consumers — some of them lapsed believers, some of them disdainful of the whole dated concept of Mickey D’s version of fast food in the face of Shake Shack and its more–attuned brethren. (Or is that chain yesterday’s news already?)

McDonald’s “pinned a big portion of the blame on the after-effects of food safety scandals in China and Japan,” write Reuters’ Lisa Baertlein and Yashaswini Swamynathan, while also acknowledging the broader problems of its business model and external pressures. 

“The company is fighting to win back customers, particularly in the United States, after failing to keep up with diners' increasing demand for healthier, fresher food,” they write. “It also is grappling with economic and political turmoil in Europe, its top sales market.”

Barron’s Ben Levisohn extracted the good new from the figures in that same-store sales in the U.S. “rose 0.4%, topping estimates for 0.3%.” In fact, “January marked the first time since October 2013 that the company was able to string together back-to-back positive same-restaurant sales,” Miller Tabak’s Stephen Anderson points out, while cautioning that management “will face a tough job in trying to regain market share without drawing the ire of franchisees by aggressive discounting.”

Sales in Europe also rose — 0.5% — while Asia Pacific, Middle East and Africa (down 12.6% from the year earlier), in general, and Japan (down 40% estimates Goldman Sachs), in particular, proved particularly nettlesome.

“‘Broad-based consumer perception issues.’ That, in McDonald's own words, is what's hobbling the fast food chain in Japan, after a human tooth and pieces of vinyl and plastic were found in its food, helping to trigger a slump in sales,” the Financial Timeswrites in a brief. Enough said, indeed.

“The uptick in U.S. sales wasn't entirely unexpected, as McDonald's early last month launched a major new ad campaign from Leo Burnett Chicago tied to its longstanding “I'm Lovin' It” campaign theme line first introduced more than a decade ago,” writes Lewis Lazare in Chicago Business Journal. “McDonald's spent heavily to kick off the campaign, focusing on a couple of key products, including the Big Mac and the Egg McMuffin.” 

But some folks felt differently about the new advertising direction.

“I imagine they'll see an even steeper decline this month as people stay away for fear of embarrassment: I know I won't be in because of their ‘Pay With Love’ promotion,” writes Robert Harper in the Comments section of the Wall Street Journal’s coverage of yesterday’s results by Annie Gasparro and Chelsey Dulaney. “What genius thought that up?”

Well, it was ultimately approved by CMO Deborah Wahl, who joined the company last March, Gasparro and Dulaney tell us. Anna North rounded up some of the bad vibes felt by various commentators in a New York Times piece the other day, with the Wall Street Journal’s Kate Bachelder having literally done the dance and concluded that it was “an idea that never should have left the conference room.”

Other email writers to the WSJ say no amount of marketing efforts — and there have been “umpteen” in the past few years, observes Daniel Greene, including “song and dance, inane Q&A websites [and] new makeup for Ronald McDonald” — have addressed its fundamental problems, which tend to stem from it’s being about as relevant to today’s consumer as a black-and-white television set. With tubes.

“In short, McDonald’s has been caught in a whirlwind of confusing brand identity paradoxes; a situation in which the company’s inadequate products, confusing messaging, and overly humble messengers have aggravated its sinking public image,” concludes Jeffrey Sonnenfeld, who is senior associate dean for leadership studies and Lester Crown professor of management at the Yale School of Management. 

Sonnenfeld serves up five quandaries — facing the chain in a Fortune commentary titled “McDonald's Deserves a Break Today”: 

  • Food quality;
  • Food safety;
  • Pricing policy; 
  • Standardization vs. customization; 
  • Supplier sourcing.

So what’s McDonald’s to do? Glad you asked, says Bruce Horovitz in USA Today after speaking to four industry experts and coming back with five suggestion he elaborates on here:

  • Go back to basics; 
  • Emphasize real ingredients; 
  • Stress value;
  • Stick with one design for the stores;
  • Show employees love. 

As for that last point, they might want to say it for $15 an hour.

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