McDonald’s CEO Don Thompson stepped down amid falling sales and profits of the company. The world’s largest hamburger chain is losing market share, sales and the battle for a new breed of more health-conscious consumers. CCTV America’s Roza Kazan reported this story from Chicago.
McDonald\'s losing battle for more health conscious consumersMcDonald’s CEO Don Thompson stepped down amid falling sales and profits of the company. The world’s largest hamburger chain is losing market share, sales and the battle for a new breed of more health-conscious consumers. CCTV America’s Roza Kazan reported this story from Chicago.
Last year, plunging profits resulted in one of the worst financial results in decades for America’s best-known restaurant brand.
McDonald’s says 2014 was one of its toughest years in decades, with net profits plunging 21 percent in the fourth quarter and global sales dropping nearly 1 percent.
“Looking at McDonald’s the last couple of years, they’ve been faced with a number of competitive, industry, and self-inflicted wounds,” RJ Hottovy of investment research company Morningstar Inc. said.
The company is especially hurting in the United States, its most important market, where despite a now sustained economic recovery, fourth-quarter sales dropped 1.7 percent.
“Certainly the economy has been rebounding, but what’s happened is that McDonald’s — the customer that is doing better is no longer going to McDonald’s, they’ve had other channels to go through,” Hottovy said.
These “channels” include fast-causal restaurants such as Chipotle and Five Guys, that are perceived to be healthier and fresher alternatives.
“The ingredients are better, there is more selection on the menu, I feel like it’s just better, more high quality as opposed to McDonald’s,” said one consumer that did not give a name.
The promise of “fresh food” helped drive the sales in this segment by more than 10 percent last year, according to Mintel, a market research firm, whereas the fast-food chain segment that includes McDonald’s grew just 6 percent.
Some say McDonald’s has missed the boat on healthy eating and the answer may now lie in creating an entirely separate “McHealthy” menu.
“So essentially what you do – is that you still have your core consumer coming for their fries, their burgers, and sodas, but you have new consumers that maybe maybe have given up on McDonald’s in the past, but will be willing to try this new healthy option menu,” James A. Mourey a professor at Depaul University said.
But that may not solve all its problems.
Sales plunged in China and Japan as a result of a food safety scandal where the company says it will have to push ahead with what it calls “customer recovery efforts.”
And it appears America’s iconic chain faces a “brand recovery” challenge at home too, raising eyebrows with its recent “Signs” campaign showing McDonald’s signs with various statements throughout the country. While some view it as an attempt to tug at the heartstrings, others said it was a cheap shot.
“It seems kind of desperate, it seems as though McDonald’s is saying: We know we are slumping in sales, but remember we were there when you were kids. Also, the inclusion of Boston Marathon and 9/11 is almost gratuitous, and that’s not really very good for a brand,” Mourey said.
McDonald’s President and CEO Thompson says the company will continue to face significant “headwinds” in 2015. But said the leadership is acting “with a sense urgency” to “lay a foundation for a turnaround.”