McDonald's recovery missing key ingredient

Is it time for the all-American restaurant to make a push in China?

By Minyanville.com Dec 12, 2012 12:55PM
Shaun Tandon, AFP, GettyBy Jonah Loeb

The bitterest disagreements between me and my college roommate were about fast food. He, the kind of guy who owned a flag bandana and a replica Captain America shield, was unapologetically pro-McDonald's (MCD). I turned up my nose more often than not (although once we did hit up the Golden Arches for a during a post-Yom Kippur break-fast), denouncing the chain as déclassé. I was a pretty insufferable kid in college.
 
My friend insisted that McDonald's was on its way up, pointing to the relatively gourmet Angus Third Pounders and Snack Wraps. Evidently, he was right. 

McDonald's has torn through flat sales estimates for November with a global sales increase of 2.4%, mostly in the U.S. and Europe. This follows a 1.8% decline in October, the restaurant's first monthly decline since 2003.
 
Analysts pointed to the restaurant's increasingly popular limited-time items like the Cheddar Bacon Onion Sandwich and its improved breakfast item sales as reasons for the sales bump. Another possible explanation is that there's a McDonald's right outside the Delancey St. stop on the F train, and I cannot stop walking into it and buying entire cows worth of Quarter Pounders.
 
Understandably, this has investors and analysts optimistic. Janney analyst Mark Kalinowski upgraded McDonald's to a "buy" from "neutral," claiming that the company's easier comparisons over 2013 will be healthy for the stock. The share price has been climbing back from its yearly low in November, rising to $89.41 from $84.05 after plunging from a recent mini-high in October.
 
There is, however, reason for caution. The greatest sales increases this month were in the U.S. and Europe, the two biggest markets for the restaurant. Sales in Asian markets, on the other hand, previously areas of great growth, rose only 0.6%.
 
It is here that McDonald's can take a page out of Yum Brands' (YUM) book. Yum's KFC restaurants take on an entirely new menu in Asia, offering noodles and congee made from local ingredients, while McDonald's largely remains the same, save for offering chicken thighs rather than chicken breasts in their sandwiches. There are a few regional adaptations (like the delightfully named Shogun Burger), but overall there's not a massive difference at McDonald's between Chongqing and Chicago.
 
It's no coincidence, then, that KFC consistently beats McDonald's in China; KFC has better adapted its menu to cater to the market. At the moment, McDonald's is at the mercy of its sales numbers in the U.S. and Europe. The restaurant has begun to adapt its menu to increasingly subtle American sensibilities, adding things like mushrooms, better cheeses, and beef that's not made from "pink slime." Why not do the same overseas and fight KFC for supremacy?

More from Minyanville
Tags: MCDYUM
24Comments
Dec 12, 2012 8:29PM
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I have never understood that at McDonald's, or indeed any other fast-food franchise, why people who are trying to save money, or even people who aren't, don't just buy items off the dollar menu.  These items taste the same as the more expensive items on the menu, and are much cheaper.  If you are really hungry, just buy more dollar items and you will still come out money ahead.  Maybe not good for McDonald's bottom line, but good for strapped consumers.

Dec 12, 2012 8:21PM
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I eat McDonald's as a treat..generally how it should be..it is not a staple in my diet.  Customer service for them is here nor there because it is the food that brings people back.  I do have to say that the double drive through thing they have come up with drives me nuts because it reminds me of a reduced-to-one lane in the middle of rush hour on a busy interstate highway!
Dec 12, 2012 7:20PM
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the reason KFC does better then McD's in China is it has been there more then 15 years longer there and there are probalby twice as many KFC's so the people are use to going there.
Dec 12, 2012 7:03PM
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Fast food places that keep changing their menu trying to be everything to everybody irritates the carp out of me.  It is as if they want folks to think they are really healthy and offer an option of fine dinning.  PLEASE!  If I've stopped there, I want my greasy burger and fries, period.
Dec 12, 2012 6:30PM
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Yup! John Rende is right! I've ate McDonald's all my life since I was a kid and I still do. Nope! I'll never get sick of their food. It's up to us what we wanna eat NOT the stupid government's.....
Dec 12, 2012 6:06PM
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McDonald's and all other fast food restaurants need to set up pre order kiosk  menu boards.
I may not know what I want, or what is new, that I might like to try.
I don't know is holding up (?) how many others that do know what they want.
Because the only board onsite is the order board, that means every one behind me has to wait
until I make up my mind and order.

Dec 12, 2012 5:48PM
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I agree that most McDonalds have poor customer service (same for Burger King, Wendys, etc).  There are exceptions, but is correct generally.  Yes, all (OK, most) of the world loves them, including myself.  Remember, you get what you pay for.

If you have Culver's in your area, you should get excellent service there (there are no Chick Fil A's in Minnesota). 

Dec 12, 2012 5:35PM
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I think if a person bought 800 shares of Mcdonalds and reinvested the dividends back into Mcdonalds over a 20 year period they would very happy with the return and in 20 years I will find out. However if one wants to out smart the marked and get in and out of stocks that  would be a good plan also. However I am not that smart. Long Mcd. 
Dec 12, 2012 5:02PM
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McDonalds missing ingrident is customer service.  Compare them to Chick Fil A and there is no comparison.  McDonalds employees act like they don't want to be there.  Chick Fil A employees are cheerful and pleasant and even though the "my pleasure" phrase gets worn out, it is better than the alternative.  If I had it my way, I would never go to another McDonalds.  My kids pick it sometimes and we wind up going.
Dec 12, 2012 4:55PM
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Micky Ds beef is tasteless, I only eat breakfast items
Dec 12, 2012 4:50PM
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Those Angus burgers make me throw up every time.  They just sit in my stomach.  *Gag!*
Dec 12, 2012 4:25PM
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Obviously, Mr. Loeb doesn't believe in research. McD Corp. got to where it is because of consistency. Every menu item is made the same in Bumfunct, Egypt as it is in Anytown, USA. Oh, you may have a few regional specialty names,Shogun Burger or Le Grand Royale, but the main characters remain. Ray Krotz came up with the idea and everyone else is just working off his template. His idea was for a customer to get the same burger/shake/fries/whatever, prepared the same way, at any McD location. McDs has updated their menu to include healthier foods and that's great and you can get the same choices at every McD. To change it around too much (ex: pasta alfredo in Italy, noodles in Asia) takes away from the original idea. WalMart stopped following the original idea of Sam Walton and the business is going down and customer satisfaction is at an all time low. Mr. Loeb would have McDonalds do the same I suppose.
Dec 12, 2012 3:50PM
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Hey,Their Our Only Chance to Bomb China!

Dec 12, 2012 2:51PM
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"McDonald's missing key ingredient on way to recovery"


Meat????????
Dec 12, 2012 2:37PM
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Why you don't like McDonald's, whether it is the food or the stock, makes no sense to me. Why do all the "experts" pick on McD's when ALL THE WORLD LOVES THEM??? If it isn't the "analysts", it's Michelle Obama (she is overweight herself), it's Mother's who can't control their 4 and 5 years olds and complain "McDonald's are making our kids fat". No...it's bad parenting!!!! Why is Mcd's held to different standards than ALL other restaurants??? Why??? It is quality food.....I worked there and KNOW for a fact....I don't read garbage on the internet that it isn't real MEAT or real CHICKEN.....all BS. Your expensive restaurants serve FETTUCINE ALFREDDO (heart attack on a plate) and many other foods that aren't good for us. It is OUR CHOICE to eat where we want to....not the Gov't. Mcd's is good food, great prices, and the stock is one of the ALL TIME GREATS. Go pick on some other company. I guess Walt Disney World is next.......
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