Have you tried a Ranch Snack Wrap or a Little Italian yet? Or a Little Chorizo
Melt? Or an Oriental Snack Wrap? If you have, you are not alone. These
exotic-sounding delights are all part of the “Little Tasters” menu,
introduced by McDonald’s in Britain at the beginning of last year, in a
carefully planned move.
The strategy addressed two key objectives — first, to tackle the impact of the
recession on consumers by offering them a good-value item, between £1.49 and
£1.59, which sat between the cheapest dishes on the McDonald’s menu and more
expensive lines such as the Big Mac. The second part of the exercise was all
about continuing to attract new and different customers to McDonald’s,
particularly young mothers taking their kids to the restaurant, who might
traditionally only have bought a tea or coffee because they were deterred by
the idea of a larger portion.
In doing so McDonald’s was continuing a process, on which it embarked five
years ago, to listen more to local consumers in Britain and act on what it
heard. It is something McDonald’s has sought increasingly to do around the
world. This month, the fast-food giant launched a “McItaly” burger,
enthusiastically supported by Silvio Berlusconi’s government. Luca Zaia, the
country’s Minister of Agriculture, Food and Forestry, wrote to The Times
last week after reports that the product had received a mixed reception
there. Zaia pointed out that, on Wednesday alone, 100,000 of the burgers
were sold. He added: “In Italy, we consider this a great success.”
All the McItaly’s ingredients are locally sourced and produced and will be
worth €3.5 million a month to Italian farmers in extra income. Other local
favourites around the world include the Maharaja Mac in India, which is made
of lamb or chicken; the McLobster in Canada and, in Japan, the Ebi Filit-O,
a kind of shrimp burger.
There are now signs that other multinationals are trying to boost their
fortunes globally by emulating McDonald’s in stressing and accentuating
their localism. For example, Starbucks, whose fortunes have been on the wane
for some time, has been experimenting with locally designed franchises in
stores that are non-Starbucks branded. The aim is to try to recapture the
feel of a local coffee shop of the kind whose existence was threatened by
the arrival, in its neighbourhood, of a global behemoth such as Starbucks.
Others adopting a similar approach include KFC, which has just announced a
five-year plan to upgrade its UK restaurants with new contemporary designs,
a key aspect of which will be a partnership with local property developers
to ensure that the sites are in keeping with the “look and feel” of the
area. The specific aim, it has stated, is to increase the frequency of
visits from local residents.
Tesco, too, is adopting a careful local approach towards its expansion
overseas. Although it has been happy to trade under its usual name and
branding in countries such as Thailand, Hungary and the Czech Republic, when
it entered the United States, Tesco did so under the name “Fresh & Easy
Neighborhood Market”, stressing its local credentials at every opportunity.
We will hear a lot about globalism versus localism during the next few years
(see box, below). For many, it is an environmental issue, with consumers
looking to buy locally sourced and produced goods. That debate is still
getting going — but the experience of McDonald’s in the UK has demonstrated
how, even with the most global of companies, localism can be both genuine
and a success.
The company is booming here. It recently reported, for the second consecutive
year, an increase in like-for-like sales — in other words, in those
restaurants that have traded under the same format for more than 12 months —
of more than 10 per cent.For the whole of 2008 and 2009, there were an
estimated 130 million more customer store visits while, going all the way
back to 2005, the restaurant giant has added around £465 million to its
sales.
Right now, the European arm of McDonald’s is the fastest-growing part of the
fast-food empire, accounting for two fifths of global operating profits
while being home to just a fifth of all its restaurants. Within Europe, the
British business is currently the poster-child, putting in the shade France,
long-regarded as one of the best markets for McDonald’s in the world.
What makes this story all the more remarkable is that, five years ago, the
McDonald’s business in Britain was melting more rapidly than the cheese in
one of its burgers. In this regard, it was lagging the company globally. The
nadir for McDonald’s worldwide was 2002 when, battered by aggressive
discounts from rivals such as Burger King and a growing taste — particularly
among Americans — for non-burger fare such as Taco Bell and Pizza Hut,
profits fell off a cliff. The company, also savaged in Eric Schlosser’s 2001
book Fast Food Nation, made the first loss in its history during October,
November and December 2002.
At this point, a global turnaround strategy was launched by the chief
executive, Jim Cantalupo, involving the introduction of more salads and
fruit to menus and the “I’m Lovin’ It” slogan, promoted initially by Justin
Timberlake. Things hit a wobble in April 2004 when Cantalupo unexpectedly
died and then, seven months later, when his Australian successor, Charlie
Bell, was forced to quit after the diagnosis of a cancer that would later
kill him.
By then, though, the global turnaround was well established — but not in
Britain, where sales had never really recovered after the outbreaks of mad
cow disease in the 1990s. Consumer sentiment in Britain had also been turned
against McDonald’s by the long-running “McLibel” trial, the longest libel
trial in English legal history, in which the company spent £10 million suing
the activists Dave Morris and Helen Steel for what it said were defamatory
claims made in leaflets they had distributed about the company.
British consumers had also appeared unusually receptive to Super Size Me,
Morgan Spurlock’s film on McDonald’s, which the company attempted to counter
by placing ads in the trailers before UK screenings.
Something had to change — and it did. McDonald’s global bosses in Illinois
realised that imposing uniform standards from the US was hitting European
sales and responded by making its French managing director, Denis Hennequin,
the first president of McDonald’s Europe. And, noting how successful putting
a Frenchman in charge of its French operations had been, McDonald’s replaced
its American chief executive in Britain with the Watford-born Steve
Easterbrook in April 2006.
It was the first step in recognising that, in order to succeed globally, even
the biggest multinationals must think locally. The concept of localism as we
know it today first properly emerged two decades ago in the United States,
initially as a drive among a certain kind of consumer to buy local produce
and to support organic farming methods. Some of the ideas, though, were
older. Many of the themes espoused by those pursuing what might be called a
“localist” agenda — local provenance, craft production and a dislike of
homogenised food and drink — were, for example, those underpinning the
Campaign for Real Ale, Britain’s biggest single-issue consumer group, which
next year celebrates its 40th anniversary.
During the past decade, however, the concept of localism has evolved and is
now seen by many, particularly those on the left, as a possible
counter-balance to globalisation. Businesses, particularly multinationals,
are having to adapt accordingly — and few have done it as successfully as
McDonald’s has in the UK.
By thinking as a local, Easterbrook understood British consumers better than
his American predecessors, realising that genuine and not simply cosmetic
changes were required to the way in which the company did business. He
insisted, for example, that photographs of the British farmers who supply
McDonald’s appeared on the sheets of paper put on customers’ trays. He also
launched an initiative in which used cooking oil was converted into
biodiesel fuel to power the company’s vans in Britain. Then there were the
changes to the menus and the introduction of new items, such as the Little
Tasters, as well as the introduction of more chicken-based dishes in
response to customer demand for a greater selection of supposedly healthier
white meat options.
This is thought internally to be a major reason McDonald’s has been able to
increase its sales during the recession while the UK fast-food market has
plateaued — because it has been taking market share from restaurants
specialising in chicken.
Making breakfast a more important mealtime “event” for McDonald’s was another
of Easterbrook’s initiatives. He explains: “We are still seeing significant
growth from breakfast and coffee. It is still driving sales. We are open for
longer hours than we used to be and on more days of the week. That’s why our
customer visits were up during 2009.”
The company has also raised its game in how it reacts to the media. The
expression McJob, first coined in Douglas Coupland’s 1991 novel Generation
X, made it into the Oxford English Dictionary a decade later with a
definition of “dead-end, low-paid employment” and has been used globally —
but it was Easterbrook who launched a campaign to have the dictionary
definition changed. He also enthusiastically embraced the Government’s
initiative to allow big businesses — others include Network Rail and Flybe —
to award their own qualifications equivalent to GCSEs, A levels and degrees.
Easterbrook cannot claim credit for all the improvements made. The company’s
much-admired revamp of its restaurants, in terracotta, olive and sage green,
with softer lighting from trendy low-hung lights, plastic being replaced by
brick and wood, armchairs and wi-fi, has been a global initiative.
There is no doubt, though, that it is contributing to UK sales growth.
Easterbrook cites a “sales kick” of around 6 per cent when a site is
refurbished — amid evidence that, along with the extended opening hours and
revamped menus, the new look to the restaurants is encouraging consumers to
pay visits at different times of the day than they traditionally would have
done.
It all means that sales in Britain nudged higher during 2006, grew more
rapidly in 2007 and faster still in both 2008 and 2009. McDonald’s has not
got its localism right everywhere, but for now at least Ronald has something
to smile about.
Your Comments
Order By: