Monopoly campaign sends McDonald's directly to profits

A promotion centered around the popular US board game played a big part in the fast-food giant's October revenue boost.

By InvestorPlace Nov 8, 2011 12:07PM

By Kyle Woodley, InvestorPlace

 

Anyone with an office desk drawer full of old "Baltic Avenue" and other game pieces can attest to the lure of McDonald's (MCD) perennial Monopoly campaign. For almost a quarter of a century, consumers have been guzzling down large fountain drinks and swallowing Big Macs trying to match "Boardwalk" with one of their 12 "Park Place" pieces, with the vast majority failing to score the $1 million prize but content to win a few free small fries.

 

Apparently the craze surrounding Uncle Pennybags hasn't died down.

 

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The world's largest fast-food chain Tuesday cited the popularity of its Monopoly game in America, as well as success overseas, for a 5.5% same-store sales increase in October. Revenue rose 6.1% in the Asia and Pacific region, 5.2% in the U.S. and 4.8% in Europe for the month. That could be another booster for the stock, which is up 21% over the past six months.

 

The game's tractor beam on consumers works twofold: It brings in customers who otherwise might have eaten at another burger slinger, and it brings them back again and again. While many of the game's prizes can be won on single-shot instant-win tickets, the big-ticket items -- including vacations, cars and varying cash awards -- can be won only by customers collecting a complete set of colored properties or railroads. In any three-property section, two tickets can be found en masse, compelling consumers to return repeatedly in search of the McMuffin that can change their lives.

 

But while the giant continues to reap gold from reawakening its decades-old partner year after year, it's been McDonald's willingness to stick its toe into newer waters that has kept the revenues rolling in. In the past half-year alone, McDonald's has unveiled several initiatives to help both the bottom and top lines, with many hitting the mark.


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This summer, McDonald's unveiled its frozen strawberry lemonade, which was branded under the already successful McCafe line, which consists of lattes and other specialty coffee drinks. The company saw a 6.9% jump in sales for June, with much help from the summer treat.

 

The McCafe line has been a boon to McDonald's. The fluffy coffee drinks, in addition to biting the ankles of popular barista Starbucks (SBUX), account for 20% of the store's sales and contribute about 80% of their price to profit. The company's bread and butter -- hamburgers -- contribute about 60%.

 

Among other initiatives: McDonald's has rolled out (and will continue to tinker with) healthier Happy Meals, brought back the cult hit McRib and expanded it to a national rollout, unveiled touchscreen-powered self-checkout at European stores and is testing its own in-store TV channel, which would show local content and, more importantly, more advertising.

 

In addition to McDonald's willingness to evolve, there's still plenty of upside to the annual rite of Monopoly passage -- and other short promotions, such as the St. Patrick's Day Shamrock Shake -- as evidenced by Tuesday's report. These games and products at best fill the company's coffers, or at the very least excite consumers enough to get them into stores, where they can buy more high-margin goods. And as McDonald's has proved, it can provide plenty of those.

 

Kyle Woodley is the assistant editor of InvestorPlace.com. As of this writing, he did not own a share in any of the aforementioned stocks.

 

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