News Column

Germany, Japan, U.S. Markets Are Fixer-Uppers for McDonald's

May 17, 2014

By Jessica Wohl, Chicago Tribune

mcdonald's

McDonald's Corp. admits its efforts to fix things in Germany and Japan will take time and that it needs to pay better attention to what customers want, two company executives said on Friday.

The world's largest restaurant company says that it wants to stabilize its business key priority markets including the United States, Germany, Australia and Japan.

McDonald's said that it might drop its longtime advertising agency in Germany, Heye GmbH, which is part of DDB Worldwide.

Heye came up with the slogan "I'm lovin' it," which has been used in McDonald's commercials since 2003, making it the longest-running slogan in the company's history.

Now, the agency "is on notice," as McDonald's believes it needs to bring some new creative thinking into Germany, where customers are very value focused, said Doug Goare, president of McDonald's Europe.

Goare and Dave Hoffmann, president of McDonald's Asia/Pacific, Middle East and Africa, or APMEA, expressed confidence in the company's plans for their two regions while meeting with Wall Street analysts in Oak Brook on Friday.

Friday's discussion comes after McDonald's restructured its European business from four divisions into three as of Jan. 1. It also appointed a new CEO of the Japan business, Sarah Casanova, in recent months.

Together, Europe and APMEA make up about 63 percent of McDonald's sales and 55 percent of its operating income. The two regions also include three of the four markets where McDonald's is working on big improvements. Around the world, the company is planning to refranchise more of its restaurants, a move that it mentioned again on Friday and expects to discuss more in the coming months.

Meanwhile, weakness in Japan continues to weigh on APMEA's overall performance. Japan is going to be a challenge for the rest of the year, Hoffmann said.

The company has started to make changes in Japan such as adding seasonal items to the menu, but it will take time for customers to notice the changes, Hoffmann said.

Hoffman said he felt good about the company's performance in China, and said results in May have been "encouraging," but quickly added that he would not "over read" into his comments.

Even after Friday's two-hour session, questions remain over what the company really needs to do to transform Germany and Japan "and get them back on the right track" said Morningstar senior restaurant analyst R.J. Hottovy, who attended the meeting.

The company has already worked on improvements in the United Kingdom, where it struggled a few years ago and is doing better after it focused on winning back customers with promotions and other changes. Now, it needs to be better as using customer data to figure out the right plans for markets such as Germany and Japan, the executives said.

In Europe, one possible way to boost sales is adding breakfast to more restaurants, Goare said. Right now, just over 50 percent of European restaurants have breakfast, he said. The company can also use its McCafe coffee business to drive repeat purchases. It already has a coffee loyalty program in Sweden.

Tribune reporter Robert Channick contributed.

jwohl@tribune.com

Follow @JessicaWohl Follow @chibreakingbiz

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Original headline: Germany, Japan, U.S. markets are fixer-uppers for McDonald's



Source: Chicago Tribune (IL)


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