McDonald - The Arthur Page Society

per cent, which means sales per restaurant have dropped. In contrast, Burger King outlets
increased by 6.9 per cent, and its sales grew by 9.2 per cent.
Meanwhile, in McDonald's international division - where 80 per cent of profits come
from the UK, France, Germany, Canada, Japan, Brazil and Australia - the company is
having to open smaller, lower volume stores because prime sites in the big cities are
already established.
It is also a victim of demographics. America's population is ageing and the teenagers who
grazed on hamburgers in their teens are now middle-aged and more health-conscious.
Last year the company launched the Arch Deluxe, a "sophisticated" adult burger with a
secret sauce of mayonnaise and two mustards, and an optional slice of bacon, in a bid to
appeal to this "baby boomer" generation, who are supposedly more interested in taste.
But the Arch Deluxe has not proved to be the saviour McDonald's hoped it would. It is
high in fat, high in calories and expensive - baby boomers decided that if they were going
to be unhealthy and eat a burger, they would rather eat a "vulgar" one at 99 cents than a
"sophisticated" one at $1.79. And of course the Arch Deluxe, in trying to be the perfect
junk food for adults, failed to appeal to McDonald's core market - children.
Ron Paul, president of Technomic, says the hype surrounding the launch of the Arch
Deluxe put too much consumer expectation on the product. "The Arch Deluxe was less
than industry observers expected. It was not good enough or different enough to move
anyone away from their favourite sandwiches elsewhere," he adds.
Earlier this year, in a dramatic shift in direction, McDonald's moved away from
concentrating on upmarket, added-value burgers to a discount strategy: Campaign 55
(1955 was the year of the chain's inception).
Under Campaign 55, the company slashed the price of a sandwich, such as an Egg
McMuffin or a Big Mac, down to the very appealing 55 cents (30p). Sort of. What many
customers failed to understand was that they could only get their 55-cent sandwich if they
bought a drink and French fries as well, and if the particular sandwich they wanted was
on offer that month.
Campaign 55 confused and annoyed consumers, and importantly, it failed to deliver on
what it promised. After six weeks the company pulled the promotion, except for a variant
on the breakfast menu. It is a humiliating climbdown for a company not used to reverses.
McDonald's is also suffering from a quality perception problem - observers just do not
rate the taste of its burgers.
Damon Brundage, an analyst at NatWest Securities in New York, says: "Frankly the
future isn't very good. There has been deterioration in the quality of McDonald's products
where Burger King and Wendy's have got better."
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