Products such as the Big Mac, McMuffin and Fries generate 40 per cent of McDonald’s global sales and represent an opportunity to “provide a constant drum beat of communication” rather than communicating “disparate” messages and chasing “a few too many limited time offers”, according to president and CEO Don Thompson, who was speaking on a call with analysts today (22 April) after reporting the company’s first quarter results.
McDonald’s reported a 1 per cent dip in profits in the three months to 31 March as a “strong” 1.4 per cent lift in European sales was offset by a worse than expected 1.7 per cent sales decrease in the US business, partly due to the severe winter weather in the region.
Thompson outlined four opportunities to return to profit growth in the long term: strengthening its planning process to more effectively bridge customer insights into actions, strengthening marketing messages to better resonate with customers and create stronger awareness, ensuring value offers are consistent and clearly messaged and a refocus on the core menu.
On the marketing front, Thompson said the strategy will “take a bit of time” owing to the company’s six to 12 month planning cycles. He admitted that in the face of external pressures, McDonald’s had been too focused on optimising profitability but that the brand plans to “get back into the mind of consumers” by a more streamlined marketing approach, highlighting the strength in its core menu and the affordability of its products.
He also said external pressures, driving profitability at a restaurant level to handle cost structures, meant McDonald’s had lost its focus on analysing consumer data in order to make business decisions.
But Thompson added: “We are refocusing on the front end of the insights and how those translate to plans that are customer focused first. We will always have profitability aspects in mind as we plan, but it has to be customer focused first.”
Thompson also outlined the company’s ambition to invest more in digital technology to bring “a new level of convenience and fun to the McDonald’s experience. He identified the areas of opportunity as payments, ordering, redemption offers, CRM and telling the story of McDonald’s better across social media.
McDonald’s does not strip out its UK results, but the company did say France and the UK were the star performing regions across Europe in the quarter.
Jill McDonald, North West Division president and CEO of McDonald’s UK, said the UK division’s success in growing like for like sales and customer visits is down to “listening to what customers want”: offering quality food, increased menu variety and affordable prices.
She adds: “The strength of our core menu has been complemented by the success of new introductions elsewhere. Sales across our McCafé drinks range, which includes our new Mocha as well as Iced Smoothies and Frappes have grown strongly, helping cement our status as a popular beverage destination.
“We’ve also continued to see the breakfast menu contribute to sales growth, in particular the Sausage and Egg McMuffin and Bacon Roll, both no doubt boosted by the investment we made this time last year to become the first high street restaurant chain to serve 100 per cent Freedom Food pork from RSPCA-certified British farms across our entire menu.”
The economic outlook for the UK “remains challenging”, which is why McDonald’s UK will “stay committed” to offering value, variety and investing in its restaurants, McDonald adds.