McDonald's gets back to basics

The fast-food chain is pinning its UK revival on burgers, fries and a strong value proposition. Joanna Bowery reports.

Given the incessant headlines about an obesity crisis and the ubiquitous Jamie Oliver popping up on TV to preach to the nation about healthy eating, the last announcement one might expect from McDonald's is a UK comeback.

Last week the global fast-food giant reported that comparative sales in the UK had risen for six months in a row. This revelation is all the more impressive when it is considered that the Golden Arches has become something of a punching bag for health groups, which claim the high fat and salt content of its products have contributed to Britain's growing obesity problem.

Perhaps the most important contributor to this return to form has been the chain's decision to revert to offering core meat-eating customers what they want, encouraging them to eat more via value offers, and increasing the time slots in which they can consume its food.

Speaking at the announcement of McDonald's results, the company's chief executive, Jim Skinner suggested it had been leadership changes in the UK that had spurred the recovery.

In May, the chain named former British Airways marketing chief Jill McDonald as senior vice-president and chief marketing officer for Europe, prompting the departure of its then-UK chief marketer Laurie Morgan. But perhaps most importantly, a month before it had promoted Steve Easterbrook to UK president and chief executive.

Transparent approach

According to McDonald's chief financial officer Matt Paull, Easterbrook's style is all about brand transparency, and just a month after taking the top job, he participated in a live debate on BBC's Newsnight with one of McDonald's biggest critics - Eric Schlosser, the author of Fast Food Nation.

'The fact that (Easterbrook) showed up was a winner, because we were willing to be transparent and had nothing to hide as a company and a brand,' says Paull. 'It sends a very strong message about how proud we are of our food and our brand. That's a big reason why we're beginning to see some turn in the UK.'

Although a change in management may have had some influence, kick-starting sales in such a hostile environment requires consumer buy-in. This, according to Skinner, has been achieved through some basic groundwork over the past 18 months. 'It is down to better delivery in the restaurants, better delivery of new-food news and better delivery in overall communication with our customers,' he says.

It was in March that the chain sowed the seeds of its UK turnaround, when it announced a £140m investment to refurbish its outlets and update its image.

A renewed focus on its menu has also helped to boost the company's performance, supported by an ad campaign in the summer that highlighted its value proposition - an area in which it has always been strong. Analysts have suggested that the Pound Saver Menu, in particular, has fuelled sales.

'Experience shows salads don't work and McDonald's has realised that a return to its core offering is the key to success,' says one industry source.

Another reason for its change in fortunes is a change in eating patterns, according to Jonathan Thomas, principal market analyst at food research firm Leatherhead Food International. 'Although families remain a major market, it is attracting more late-eaters looking for a fourth meal after they have been out for a drink,' he says. Initiatives such as the Pound Saver Menu and later opening hours are catering to that need.

Fears that this refocus on value could dent its profits are unfounded, claim analysts. 'Margins are good. McDonald's needs traffic and good value will get customers in through the door,' says one.

A return to its core burgers and fries offering suggests that McDonald's recognises it will never be able to appease the health lobbyists entirely. But this has not meant it has given up trying, and it is continuing to make improvements to its food.

Healthier products

Last month the company announced plans to reduce the salt in its French Fries by 50% in Ireland and suggested that the initiative could be extended to the UK (Marketing, 20 September). McDonald's has already reduced the salt content of its Fries by 24% and its Chicken McNuggets by 30% in the UK.

It is also committed to providing nutritional information, having unveiled plans last year to label all its products with signposting on fat and salt content.

Skinner believes its UK growth 'is definitely sustainable', and adds that while six months is by no means a long-term trend, 'we are disciplined about staying the course'.

In order to maintain its upward trajectory, the company is pinning its hopes on 'an innovative pipeline' of menu items, everyday affordability and increased consumer convenience.

However, the difficult environment it has faced in recent years may yet worsen; McDonald's cites public boycotts, adverse public perception and potential regulations restricting advertising to children as potential threats.

With such a background to contend with, there is a lot more work to do to ensure the Golden Arches are shining as bright in another six months' time.


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