McDonald’s, where a family of four can eat breakfast, lunch or dinner for less than it costs to prepare a meal at home, is blaming weak consumer spending for an unprecedented stretch of punk earnings . Someone should level with them: “It’s the hamburgers, stupid!” Q3 profits were down by 30%, generating a lot of hissing and clucking on Wall Street. Portfolio managers must be scratching their heads trying to figure out how the fortunes of an American icon could have fallen so swiftly. Doubtless, Mickey D’s oh-so-clever ad-men are hard at work on a rescue effort, crafting a powerful new “message” for the Super Bowl audience. What they really need to craft is a hamburger that tastes more like one. Face it, we’ve been eating mystery-meat patties under the Golden Arches by the tens of billions for three generations, and what little savor they provide has come solely from the ketchup, pickles, mustard and onion on top.
Ironically, it is the soaring popularity of the hamburger itself that may have contributed most to McDonald’s weakening sales. America is very obviously in the midst of a hamburger renaissance, as witness the rapid growth of such real-burger chains as Smashburger, Freddie’s, In-N-Out and Five Guys. You can enjoy the actual taste of beef at all of these places – or fill up for cheap at McDonald’s. And if you want the deluxe experience, there are more great bar-burgers out there for $8 to $20 than America’s food critics, magazine polls and foodies can celebrate. Here in Boulder, just to mention a few, are Tom’s Tavern (which has continued to offer the original bar burger even though the place was transformed into the upscale Salt restaurant); Drakes Haus, which features merlot-infused beef; Larkburger’s black-angus-on-a-bun (“This isn’t a burger you hold. It’s a burger you behold. Down to the last detail…”), Mountain Sun Brewery, Murphy’s Bar & Grill and the Dark Horse Bar & Grill. And although “World’s Best Burger!” banners may hang from the walls of a thousand taverns across America, in many instances the claim, arguably, is only somewhat exaggerated.
A Supply Problem
So what is McDonald’s to do? So ubiquitous have the Golden Arches become around the world that merely altering the mix of condiments slightly, never mind the quality of the beef, would require major adjustments in the supply chain. However, any solution would surely include a simplification of the menu, which currently lists nearly 150 items. “Healthy choice” foods are also a must, although this marketing space has grown crowded with competition – most formidably from Chipotle and Subway. Even subs and pizza are promoted these days as heart-healthy, depending on the ingredients, so McDonald’s might have to go over-the-top to find something new. (Wheat grass shake, anyone?) One obvious pathway would be to allow franchisees much greater leeway in adding local favorites to the menu. This would require a radical shift in the company’s business model, however, since localizing the menu would diminish the economies of scale achieved by purchasing food ingredients in huge quantities from regional suppliers.
A Solution May Be Impossible
Of course, it’s always possible there is no solution – that McDonald’s sales will continue to decline because its business model cannot adapt to rapidly shifting tastes in food. Even bankruptcy may lie in prospect perhaps 30 or 40 years down the road – an end that some would have considered impossible for another icon of American business, Sears, which is probably no more than two years from flatlining. If more-aggressive, cleverer marketing were the answer, Coca Cola would not be tearing its hair out over Joe Consumer’s recent epiphany that every 12-oz can contains the equivalent of ten sugar cubes. The fact that Joe’s newfound aversion to sugar has come to include even orange juice suggests the marketing geniuses at Coca Cola face an uphill battle.
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