Ronald McDonald might have his signature smile turned upside down after Thursday’s Q2 earnings call. While discussing the company’s breakfast performance, CEO Steve Easterbrook had some bad news.
“When you look at our breakfast performance overall, that’s an important part of our overall sales mix, and it’s been a stronghold for us for many, many years. But we’ve just begun to lose a little bit of share at that daypart,” Easterbrook said.
CFO Kevin Ozan had explained that the chain had lost some focus on their breakfast business in May. Since then, the company has tried to fix this problem. This problem isn’t one that can be ignored considering 24 percent of the chain’s business comes from breakfast and sales during morning hours. However, in the last two quarters there have been red flags.
When McDonald’s had announced all-day breakfast in 2015, sales rose by 5.4 percent. However, it might now seem as if McDonald’s has hurt itself by offering the value menu and breakfast all-day side by side. Senior manager of consumer insights at Technomic, Robert Byrne, explained how this could cause sale declines.
“When you re-create your value menu and tier it the way McDonald’s did, you’re going to take business away from other dayparts. Consumers only have so many opportunities to eat out per week, and if you converted me from breakfast to lunch because that’s going to allow me to stretch my dollar more, the reach may be exceeded here,” Byrne said.
However, McDonald’s had some tricks up their sleeve in order to fix their morning business. One of these was the new espresso beverages they added late last year. The company called it “a renewed focus on its McCafe coffee offerings.” In addition, barista-style coffee machines were added to US locations. It made sense to use coffee in order to attract morning customers.
To add more consumer interest, the chain is also testing out their new ‘muffin toppers’ – almost exactly the same product as seen on an episode of Seinfeld. Though these additions were interesting, the Thursday report showed that so far, these attempts have failed to boost breakfast sales.
“Breakfast is a particular challenge because it’s so routine. To reinvent habituation and consumer behavior – that is a big mountain to climb,” Byrne said.
Having customers look at McDonald’s as a prominent breakfast option might be tricky with all the other coffee and breakfast chains out there. The chain is looking at its marketing approach in hopes to secure their spot among breakfast competition. During Thursday’s earning call, it was evident that last year their focus was mainly local – this was changed to national in 2018.
“We just need to make sure we’ve got in the right national value platform related to breakfast as well as the right local messages that can resonate with the individual local customers in each place,” Ozan said.
Currently, McDonald’s attempts to boost their breakfast business haven’t worked, which is no surprise considering the intense competition from other chains. Perhaps a new idea or better marketing techniques will help the chain recover from this loss.
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