There may be a silver lining to McDonald’s supplier woes in China: The mess has hurt the chain’s overall results so badly that its continuing decline in the US market doesn’t look so bad by comparison. Now McDonald’s is turning toward digital transaction technologies to save its bacon.
McDonald’s global sales fell by 3.7 percent last month as its Asia-Pacific region dropped by 14.5 percent thanks to the food-safety scandal in China, in which an expose showed workers at supplier Shanghai Husi Food Co. repackaging expired meat. McDonald’s cut off the plant in Shanghai and vowed to increase audits and video monitoring at suppliers, but the damage already was done in the minds of Chinese consumers, and who knows for how long.
Meanwhile, things weren’t so hot in Europe either, with sales dipping 0.7 percent, certainly not helped by the fact that food-safety regulators in Russia shut down a bunch of McDonald’s outlets citing food-safety concerns—a move that many analysts believe actually is a geopolitical gambit meant to send a message to America to stay out of the Russia-Ukraine conflict.[more]
In any event, at least all of those woes took eyes off McDonald’s intractable problems in its home market. New US operations chief Mike Andres is coming on board only to be greeted by a spate of problems that seems to keep growing. US same-store sales in August declined by 2.8 percent, a result that seemed to reflect the fact that just about every major trend in the restaurant industry has been moving against McDonald’s lately.
There’s the continued rise of fresh-fare and fast-casual competitors such as Chipotle; protests at McDonald’s restaurants by living-wage activists and McDonald’s employees; and the lack of a truly big new-product hit at McDonald’s lately, as the “Build Your Own Burger” test in Southern California and a new Bacon Clubhouse burger don’t really rank as major innovations.
McDonald’s also faces long-term brand erosion. It has lost its first-place positoin as the fast-food chain with the most “kid appeal,” according to new research by Sandelman & Associates, a position now occupied by Chick-fil-A. No doubt much of that is due to how Millennial parents of young children are favoring fast feeders with reputations for higher-quality and fresher food than McDonald’s.
And as No. 1 in the US quick-serve restaurant industry, McDonald’s faces the biggest share of the burden from the fact that Americans in general seem to be losing their taste for traditional fast food, according to new research by Brand Keys. This is true with other generations, such as boomers, as well as Millennials.
Desperate for measures that will reverse its momentum, McDonald’s has been experimenting with tablet ordering, something that fast-casual chains such as Applebee’s and Panera already have been rolling out. One potential advantage of human-less ordering would be to cut labor costs at its restaurants at a time when the zeitgeist is pushing McDonald’s to raise its entry-level wages. In the meantime, McDonald’s also was among the initial merchants to raise its hand for Apple Pay and is rolling it out across all US locations.
The company also confirmed today that it filed a federal trademark for “McBrunch,” but wouldn’t say whether the term was connected to a new product platform currently in development or testing. The chain has been toying with the idea of extending breakfast hours and creating new day-parts, ala Taco Bell, in order to add excitement to the menu.
But for McDonald’s, its popularity always has been about price, convenience and ubiquity, not a me-too digital-ordering platform. If that’s all Ronald McDonald has left up his sleeve, this won’t be the last bad month under the Golden Arches.
• Connect with Dale on Twitter: @daledbuss