Like a little brother struggling to keep up with his older sibling, Burger King seems destined to live in the shadow of its bigger rival McDonald’s.
Despite the company’s claim that taste tests prove its burgers are superior, Burger King still languishes in second place in terms of global sales.
But things are about to hot up in the burger war as Burger King makes another bid for world domination following the appointment of Chris Clouser as global chief marketing officer and executive vice-president (MW last week) by new chief executive John Dasburg.
The new team is tasked with turning around the burger chain, which has seen profits fall by seven per cent in the six months to February.
Last week Clouser announced that Burger King’s marketing strategy is “going back to basics” by moving away from price-cutting and instead focusing on the attributes of its flagship flame-grilled Whopper burger.
The company claims the Whopper, which competes with McDonald’s Big Mac, is preferred by customers in taste tests but has suffered from inconsistent quality across its different markets and franchises.
A spokeswoman for Burger King confirms the company will focus its investment on the Whopper brand but adds it is too early to say how this strategy will be rolled out.
Analysts agree that focusing on the brand’s core attributes is the right way forward, but question the effect on the company’s long-term brand building strategy and product innovation.
Professor of brand building at the Cranfield School of Business Management Simon Knox says: “Going back to basics could be a good consolidation strategy for Burger King, but that leaves a question mark over its future growth.”
He adds Burger King has failed to make inroads in the UK market, of which McDonald’s holds about 80 per cent, because it has to compete with its rival’s strong and consistent advertising and brand values.
And as a “minor number two”, Burger King simply does not have the financial stature to vie for the number one position.
By concentrating on the Whopper, Burger King may well improve its core product, but could end up shooting itself in the foot when it comes to new product development (npd).
McDonald’s claims npd is a “key” factor in its marketing strategy and over the coming months plans to add hot dogs, salads, and new chicken and fish products to its menu.
McDonald’s has also developed business interests beyond its burger-and-fries roots. It has a 33 per cent stake in Pret a Manger, operates the Aroma cafÃ© chain and is opening two Golden Arch hotels.
Over the past few years both companies have increasingly put their faith in promotional giveaways, such as toys and film merchandise, to attract children, and value meals to appeal to adults. Burger King’s tie-ins include The Simpsons and PokÃ©mon, while McDonald’s has run Beanie Babies’ promotions.
But one advertising agency insider says that Burger King lags behind McDonald’s when it comes to brand building: “There is always the sense that it is number two. Even when it comes to menu innovation and promotions for children, the perception is that it is following in McDonald’s footsteps.”
Another agency source says Burger King’s strength lies in the Whopper and its flame-grilled taste but the company has failed to capitalise on this in its advertising by producing quirky ads that appeal to the UK market.
Burger King is unlikely to go down that route, particularly after Dasburg’s recent restructuring of the company’s management into “functional” rather than geographical divisions. Overseas marketing directors are likely to take their cue from Clouser and more US-produced ads will probably find their way to the UK. The company claims it is too early to say whether ad agency arrangements will be affected. McCann-Erickson won the £284m US account last year from Lowe Lintas, although Lowe still handles the £11m UK creative business.
Dasburg, who worked with Clouser at Northwest Airlines, has appointed airline colleague Ben Hirst as executive vice-president and general counsel with responsibility for Burger King’s legal affairs.
Kim Lopdrup, former chief executive of Allied Domecq Quick Service Restaurants International, also joins the company as executive vice-president and chief operating officer.
With Lopdrup and two of his old buddies by his side, Dasburg hopes to prepare Burger King for separation from its parent company Diageo. The company’s franchisees are in favour of a split as they claim Diageo has mismanaged the brand, which has led to leadership instability and an unfocused marketing message. An initial public offering (IPO) of the first 20 per cent of Burger King had been expected to take place in the second half of this year but was delayed due to “difficult market conditions”.
As Burger King’s eighth chief executive in 12 years, the pressure on Dasburg to succeed where his predecessors have failed is huge.
So far Burger King, which has 80 per cent of its restaurants based in the US, has failed to capitalise on the problems that have beleaguered McDonald’s of late. Global profits of the world’s number one fast-food chain fell 16 per cent (six per cent in Europe) to £266m in the period January to March. The BSE scare which has affected meat consumption across Europe and the spread of foot and mouth in the UK are blamed for the dip.
“McDonald’s is struggling to meet its double-digit targets,” says a branding expert. “But following its investments in Aroma and Pret a Manger, it has developed a ‘portfolio strategy’ that not only caters for young parents with children but others as well. And both Pret and Aroma have higher business margins.”
McDonald’s has recognised that people’s lifestyles are changing and taken action accordingly. Burger King may find its new strategy is only a short-term solution.
“Burger King may have to move away from concentrating on Whoppers alone because there are questions about how viable it can be as a standalone business,” says the expert. While Burger King is at long last getting its team in shape to challenge McDonald’s, it may find its arch rival is now playing a different ball game altogether.
Despite its ambitions, the “little brother” may have to remain content with defending its number two position from the smaller players snapping at its heels.