Cracks begin to show in McDonald’s golden arches

McDonald’s is in a flap: it is to close 25 UK restaurants following a slump in sales, while the threat of avian flu has forced the fast-food giant to consider contingency plans.

Profit margins across Europe were down from 15.6% to 14.9% last year; the UK outlook is particularly bleak, with the corporation admitting “weak sales results”. A further 50 of its 1,200 UK restaurants are being handed over to franchisees as the US chain faces competition from sandwich bars and cafés.

Critics have lambasted the chain for suggesting it would drop chicken from the menu if bird flu arrived. A McDonald’s spokesman told a national newspaper last week: “We have a taskforce working on contingency plans for our supply chain and, although details remain confidential, it involves potentially introducing alternatives to replace chicken.”

One former fast-food marketer says the inference chicken will be off the menu is irresponsible: “If chicken is properly cooked then bird flu is not an issue,” he says. “It is quite an irresponsible position for McDonald’s to take: it fuels public uncertainty.” Chicken nuggets remain the core of its Happy Meal range, and it has relaunched the product with breast meat and less salt. “It would have a significant impact on sales if it had to pull products off the menu,” the marketer adds.

A McDonald’s spokesman says there are no immediate plans to remove chicken and that it offers a broad selection of non-poultry products already. “It is really important to say that there isn’t a problem with chicken in the UK,” he adds.

However, any public uncertainty over chicken will be a blow for the fast-food chain. Following the BSE and foot-and-mouth crises of recent years, and a rise in consumers choosing “healthier” white meat, McDonald’s has been shifting away from beef. One advertising executive says it is not “Armageddon” for fast-food chains but successive crises have rocked public confidence. “Health scares such as BSE have affected the market,” he says. During 1996, McDonald’s stopped using British beef in an attempt to pacify public concerns. “Avian flu is going to affect it now,” he adds. “The problem is that, rightly or wrongly, these restaurants are not naturally trusted in the way they were 15 years ago.”

McDonald’s has implemented menu changes and facelifts to its restaurants in an effort to halt the decline, but admits there is a way to go. An experiment to offer vegetarians a range of Quorn-based meals and healthy options failed, with 11 items axed from the Salads Plus and Breakfast menus after less than 18 months.

The advertising executive suggests Jamie Oliver’s crusade against unhealthy food has shifted general attitudes more quickly and dramatically in the UK than mainland Europe, which has naturally had an impact on companies like McDonald’s. And he adds: “McDonald’s and its competitors are hit on value by Benjys, and on innovation by Subway and Pret A Manger. People going there would previously have gone to McDonald’s.” Publicly, the chain remains stoic about its performance: “We are doing a good job against our immediate competition,” says a spokesman.

A greater emphasis on coffee, revised product changes and a hastening restaurant revamp are under way, along with the next phase of the “I’m loving it” advertising strategy, and World Cup promotions. “Have we done enough, fast enough?” asks the spokesman. “Perhaps not, but things have changed and we are responding. We need to talk more about the quality of our food and jobs, but we are sticking with changes already made and investing in our restaurants.”

Catherine Turner

Latest from Marketing Week

PLEASE SIGN IN OR REGISTER. IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and inspiration that will help you develop as a marketer and leader.

Register and receive the best content from the only title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work, so we can make Marketing Week more relevant to you.

Register now

THE BEST CONTENT

Our award winning editorial team and columnists will ask the biggest questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we will be your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Dedicated to developing your skills and helping you achieve marketing excellence. Find guidance on leadership, professional development and the latest industry jobs.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here