McDonald’s investment in digital and loyalty is “beginning to bear fruit”, CEO Chris Kempcziski has said, with digital sales now representing almost a third of system-wide sales in the second quarter of its financial year.
The fast food giant rolled out its MyMcDonald’s Rewards loyalty programme across the UK earlier this month, after first launching in the US last year. The business now has loyalty programmes in more than 50 markets, including its top six.
In January, Kempcziski said loyalty is the “single biggest driver of digital adoption”. Today (26 July), he told investors driving up digital’s share of sales, and by extension the business’s percentage of identified customers, is enabling McDonald’s to open up “a whole range” of opportunities, from service to pricing.
In markets including the UK, Germany and France, digital currently makes up more than half of sales. In China, digital’s share of sales is over 80%.
However, in the US and Canada, digital’s share of sales sits at around 25%. As such, Kempcziski believes there is a “big opportunity” for McDonald’s to increase digital as a percentage of sales across North America.
Our creative excellence has expanded our reach and made McDonald’s not only more recognisable, but more relevant.
Chris Kempcziski, McDonald’s
Meanwhile, as enrolment and participation continues to grow, loyalty customers are proving to be more engaged, he said, with nearly 22 million US members active in the last 90 days. The scheme has also consistently driven more frequent visits and incremental sales in each of the markets it has been launched, he claimed.
“We’re starting to see the benefits [of digital], we just need to go harder and faster against that,” Kempcziski said.
Overall, global comparable sales increased 9.7% over the quarter, including a 3.7% rise in the US and a 13% rise in international markets. However, operating income was down 36% to $1.71bn (£1.42bn), related in large part to the financial impact of the business permanently leaving the Russian market earlier this year.
Marketing through inflation
In Europe, the business is also performing “very well”, Kempcziski said, with gains in traffic and comparable sales share in every major market in which McDonald’s operates.
In the UK, the fast food chain continued to grow market share, with the return of the McChicken Sandwich and Big Tasty promotions driving “significant” incremental sales.
However, Kempcziski said declining consumer sentiment is “weighing” on the business.
“In a number of markets in Europe – France, Germany and Spain as examples – we’re seeing consumer sentiment down, and in many places down at record levels,” he said.
Indeed, the latest GfK Consumer Confidence Index put the overall confidence of UK consumers at its lowest level on record for the second month in a row.
Meanwhile, inflationary pressures in Europe are elevated beyond those impacting McDonald’s in the US. In the US the business is anticipating full year inflation on food and paper of 12-14%, but for inflation to moderate in the fourth quarter. Internationally, the business expects inflation to sit at the higher end of the range, and for that to continue rising in the fourth quarter.
Admitting it to be a “challenging situation”, Kempcziski said the business is planning for a “variety of scenarios” by establishing what marketing levers might be pulled at different times.
“Do we need to lean into the value end of our platform harder, for example? That could be one scenario,” he explained.
“Because of this uncertainty around consumer sentiment, we’re having to plan for more different scenarios and that means having more flexibility in the marketing calendar to pivot if need be.”
Looking ahead, Kempcziski said McDonald’s has an opportunity to continue to improve its marketing and to become “more consistently excellent” around the world from a creative standpoint. As part of this drive, former UK CMO Jill McDonald is rejoining the business as executive vice-president and president of international operated markets.
“We’ve made a lot of progress in the US. I think there are still opportunities for us to improve our creative in some of our international markets,” Kempcziski said.
However, he highlighted the business’s “transformational marketing” thus far, noting McDonald’s multiple Cannes Lions and Effie award wins this year.
“Our creative excellence has expanded our reach and made McDonald’s not only more recognisable, but more relevant. It’s this customer connection that is continuing to drive our business in new and exciting ways,” he said.