May 14, 2021 | Report Announcements

McDonald’s seeks to continue expanding beyond its substantial brand equity built around iconic signature products (Big Mac, Quarter Pounder, McNuggets, Egg McMuffin & fries), the largest marketing budget in the industry and foundational accessibility strategies in the form of compelling price/value and convenience. To this end, its new “Accelerating The Arches” strategic plan entails: increased innovation & competition around chicken, breakfast & coffee; continued efforts around simplification; marketing shift towards cultural brand advocacy on social media; and access improvements via drive-thru, delivery & digital. McDonald’s new Crispy Chicken Sandwich (a response to the chicken sandwich war) is consistent with the brand’s belief that there is a significant opportunity to expand its chicken offerings. Notably, the brand seeks to pivot from “advertising” to engaging consumers with a tone centered around wit, self-awareness, optimism and a bit of fun (i’m Lovin it). A significant jump in social media engagement (helped by its Famous Orders celebrity campaigns) leverages new data-driven capabilities while also helping to build awareness around the chain’s progress in delivery, mobile order & pay and its forthcoming MyMcDonald’s loyalty launch (later in 2021). Further brand strengths reflected by: improving DT times driven by operational improvements and simplifications; a doubling of 2020 digital sales mix to 20% helped by mobile order & pay, curbside pick-up and DSP delivery options available in ~80% of the system; and system high EBITDAR dollar profits which helps with substantial capex investments and rents. Having said all this, substantial check increases have masked traffic losses from price sensitive customers, and this highlights the need for the brand to find a value equation that can work in concert with its check building strategy without driving cannibalization. Further, McDonald’s must continue to struggle with stiff competition in burgers, chicken, breakfast and coffee. In conclusion, while McDonald’s continues to progress nicely on its modern, upscale re-positioning, it cannot allow a pivot to a higher income demo to negatively impact its well-established reach into the huge value market given that the chain’s mammoth size requires assess across the entire consumer market.

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