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Storytelling In The News: #84

The story of how McDonald's is getting healthier: Europe

March 10, 2004

In 1993, George Ritzer published The McDonaldization of Society, a book that was said to be "one of the most influential works of the last half of this century."1/ The thesis of the book was that the replacement of human skills by non-human technology would lead to greater and greater control. By eliminating the source of uncertainty and unpredictability in a rationalizing system -- people -- McDonald's, and companies that emulated its robotic methods, would inexorably dominate the planet. It was a dismal Orwellian vision of the future.

Hamburger hell

There was just one tiny problem. The nightmare vision never happened. Fast forward to December 2002, the question was not so much whether McDonald's was going to dominate the planet, but whether McDonald's itself could even survive by using the methods lauded in Ritzer's book.. If it persisted in its approach, McDonald's, it was said, was heading to an early McGrave.

According to the New York Times of December 5, 2002, McDonald's was languishing in "hamburger hell." There were multiple problems. After watching McDonald's stock slide 60% in three years, the board ousted Chief Executive Jack M. Greenberg, 60. His tenure had been marked by the introduction of 40 new menu items, none of which caught on big. New menu items like the low-fat McLean Deluxe and Arch Deluxe burgers, meant to appeal to adults, bombed. A handful of non-burger chains were purchased, but none were rolled out widely enough to make much difference. Consumer surveys showed that service and quality lagged far behind those of rivals.

But the problems were not simply one of management. The chain was being squeezed by long-term trends that threaten to leave it marginalized. It faced a rapidly fragmenting market, where once-exotic foods like sushi and burritos were now everyday options, and quick meals of all sorts can be found in supermarkets, convenience stores, even vending machines. Could McDonald's survive?

Out of hamburger hell

Sixteen months later, in March 2004, McDonald's appears to be thriving. After 10 straight months of increasing year-on-year sales from restaurants open at least a year, including a record 20 per cent US increase in February, McDonald's, if not yet in heaven, is not only out of hell but also making plans to get healthier in Europe.

This week, the Financial Times reports that McDonald's is taking its healthier foods strategy to Europe following its decision last week to phase out "super-size" fries and drinks in the US. The company, which has been under pressure from anti-obesity campaigners, will overhaul menus in 16 European countries, where it will slash its line-up of burgers for chicken salads, yoghurts and chopped fruits, following the successful introduction of premium salads range in the US.

Denis Hennequin, who was appointed to his pan-European role just two months ago, is moving rapidly to export many of the practices he introduced to McDonald's in France. In the face of deep-seated hostility from rural campaigners, Hennequin helped turn France into McDonald's fastest-growing European market. Mr Hennequin's success in upgrading restaurants and modernizing menus is to be the template for what will be done in the rest of Europe. "People want more of a fast casual feel and that's something that McDonald's has to address," he says.

To make room for the eight healthier products, which include a grilled chicken ranch salad and a grilled chicken caprese sandwich made with mozzarella, rocket and cherry tomatoes, McDonald's will cease selling a McBacon burger and a cheeseburger.

The new menu will be more mediterranean than midwestern. The 25 new ingredients, including rocket, balsamic vinegar, red batavia, lollo rosso, radicchio, sun dried tomatoes and olive bread, reflect Mr Hennequin's belief that McDonald's must move beyond simply providing "convenience" food and start catering to a real shift in awareness of the need for a well-balanced diet.

Clarifying the brand narrative

Last Friday's sales figures for February showed that the company's recovery under Mr Cantalupo was gaining momentum, with turnover rising 23 per cent. But sales growth in Europe was 7.7 per cent. As Mr Hennequin is well aware, Europe will have to catch up.

A key factor in the turnaround so far is the company's decision to consolidate its its media buying, totaling some $1.5 billion. The firm now relies on the agency that already has most of that business, the OMD Worldwide division of Omnicom Group Inc. (OMC). Since September 2003, it has gone with a single marketing message for McDonald's around the globe - "I'm lovin' it". This is already paying off with higher sales.

The campaign and attendant products and promotions have boosted average daily transactions in the company's 13,000 U.S. restaurants by about 650,000. Not only is that "a pretty huge number" but, perhaps as important, the campaign is helping to widen the brand's appeal. "All our research indicates that, for the first time, we have the attention of young adults," said a company spokesman. "It's bringing in customers to our stores that didn't even consider coming to McDonald's."

The limits of McDonaldization

The tale of McDonald's' is a salutary one both for those who pinned their hopes on McDonaldization and for those who feared that it would destroy the planet. It turned out that McDonaldization, if persisted to the end, would have killed even McDonald's. Only by generating a new story did McDonald's have a chance to survive.

1/ - Jonathan H Turner, University of California

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