How McDonald's came back bigger than ever

How McDonald's came back bigger than ever
New York:  It was a simple plan. McDonald's would pay to appear at the top of the trends list on Twitter's home page, using the social-media site to drive people to its new commercials highlighting some of the real-life farmers and ranchers who supply McDonald's with its ingredients. Executives at the fast-food company loved the commercials; the word in-house was "authenticity."

The spots, which were rolled out in January, transported viewers to down-home places like Warden, Wash., and Astoria, Ill., where gritty men wearing denim knelt in the soil or rode horses while talking about the sacrifices they made for the harvest or the herd and dispensing nuggets of plain-spoken wisdom about their worthy jobs. "Beef's what we do," one supplier said. "Good potato," said another, examining a dirt-encrusted spud destined to end up as an order of French fries. McDonald's wasn't about fast food, the commercials suggested, but real food, born of the earth.

On Twitter that day, everything went well, at least for a while. After clicking on the hash tag #MeetTheFarmers, people were watching the videos online, and Rick Wion, the 39-year-old director of social media for McDonald's U.S.A., was pleased.

"We got lots of great engagement on that, lots of uptick from it, lots of video views," he says. But that afternoon, when Wion moved the conversation to #McDStories, to encourage people to keep talking about the farmers, the promotion quickly began to go sideways. From his eighth-floor cubicle at McDonald's headquarters in Oak Brook, Ill., Wion watched on his laptop - "we're watching these things like a hawk," he would tell me later - as other kinds of stories made their way into the Twitter feed, horror stories, real or imagined, justified or not, about the restaurant's food, service, atmosphere, everything. In a matter of minutes, a public relations success had become yet another public relations crisis for the company, which shifted quickly into damage-control mode. A little more than an hour after the ill-fated #McDStories appeared that afternoon, Wion decided he'd seen enough for one day and pulled that hash tag off the Twitter home page.

The episode got what Wion said was an undeserved amount of attention in the traditional and online press. "It wasn't even in the top 10 things that were talked about that day for our brand," he said. People on Twitter, he pointed out, wrote about the Egg McMuffin "four to five times as much" as they complained about the company at #McDStories. But the anti-McDonald's Twitter storm wasn't exactly an anomaly either; it reflected a larger and longstanding problem facing the company.

For years, critics have been taking on McDonald's, questioning its practices in an increasingly health-conscious time. The most famous assault on the company's reputation was probably Morgan Spurlock's "Super Size Me," the 2004 Oscar-nominated documentary that suggested a month of eating only McDonald's meals might hasten your death. But that has hardly been the only grenade lobbed in the company's direction.

In the last year alone, nuns in Philadelphia, Seventh-day Adventists in California, doctors in Chicago and activists in Boston have warred with McDonald's over its menu, its marketing, its mission or all of the above. Critics say McDonald's minimizes its role in America's obesity epidemic while continuing to market its food to children through Happy Meals. Some have called for the dismissal of the long-time clown mascot Ronald McDonald. More recently, the presence in McDonald's hamburgers of "pink slime" - beef scraps turned into a paste and treated with an ammonia solution - became a cause celebre. (McDonald's reported in January that it discontinued using pink slime last summer.) And later this month at this year's annual meeting, activists will get shareholders to vote on a proposal that would require the company to respond to the growing evidence linking fast food to obesity and other diseases, just as they did at last year's meeting.

Now McDonald's is fighting back, quietly launching a major counteroffensive of its own. And it isn't simply trying to keep its current customers happy; it's also hoping to convince McDonald's sceptics that they're wrong.

The company's bottom-line success in recent years has been unmatched by its traditional burger-chain competitors. Wendy's and Burger King have been losing market share, while McDonald's has been growing, according to an analysis by Technomic Inc., a Chicago-based food-service research and consulting firm. Based on 2011 sales data, Technomic estimates that McDonald's owns nearly 17 per cent of the limited-service restaurant industry in the United States. That's not only the largest share, according to the analysis, but also nearly as much as the next four restaurants in that category combined - Subway, Starbucks, Burger King and Wendy's.

Even a sputtering economy hasn't slowed the company down. In 2011, the average free-standing McDonald's restaurant in the United States generated nearly $2.6 million in sales, an increase of roughly 13 per cent since 2008. Last year, sales nearly doubled the industry's projected growth rate by growing 4.8 per cent over the previous year. And people weren't just buying the McRib, the highly processed pork sandwich whose popularity baffles even some at McDonald's. Sales of the Big Mac, the chain's signature product that was first introduced nationwide in 1968, rose 10 per cent last year, helping to push the company's stock price to nearly $100 a share.

Advertising no doubt has something to do with all this success. The company's annual advertising budget has been estimated to exceed $2 billion - making it "unmatched in the industry," according to BMO Capital Markets, and roughly the size of the gross domestic product of Aruba. That allows McDonald's to reach an audience far larger than the one that saw "Super Size Me." But for McDonald's to keep succeeding, especially in the United States, it can't be satisfied with serving only its core customers.

The goal, according to Neil Golden, the company's chief marketing officer for its American restaurants, is to win over the holdouts. One way to do that is by improving the food itself. Another way is to change how we think about that food. "The consumer perception of the quality of our food is not where we want it to be," Golden told me. "Listen, we're serving 28 million people every single day; there are a lot of consumers that love what we're serving. But we believe that they would come more frequently. We also believe that there are more people that would want to come - if they could feel better about the product."

With their remodelled restaurants, additions to the menu and at least one non-traditional ally - mom bloggers - executives are trying to present a greener, more healthful McDonald's.
And in some ways the company is indeed changing. For the first time last year, McDonald's sold more pounds of chicken than pounds of beef, a seismic shift that would be like Starbucks selling more tea than coffee. Beverages, thanks to smoothies and espresso drinks, are now a $9 billion annual business for McDonald's in the United States. The restaurants themselves are changing, too, adding Wi-Fi, colourful chairs, tables that wouldn't be out of place in an IKEA catalogue and, in some West Coast test markets, flat-screen TVs playing the McDonald's Channel.

The content on the nascent channel is breezy (think Top 10 lists) and anodyne. The objective is "an agnostic view of the world," according to Lee Edmondson, the founder of ChannelPort Communications, the California company building the channel for McDonald's (its only client). In the test markets, at least, this means there will be no jarring images from CNN or Fox News. Instead, every few minutes between short features, the company's catchy jingle - ba-da-ba-ba-bah - serenades the dining room as a reminder that all is right and good. "We don't want to have graphic images up on the television screens," says Brad Hunter, the senior director of customer engagement for McDonald's U.S.A. "We're not in this to keep the news from somebody. But the way that it's shown is important for us and for our brand." Even if the new channel does not make it into every one of the country's 14,000 restaurants, the audience, Hunter says, "is everyone."

If there is one McDonald's franchise that seems to epitomize everything about the company's recent efforts to win over new customers and strengthen bonds with old ones, it can be found in Riverside, Calif. There are solar panels on the carport, eco-friendly L.E.D. lights in the ceiling panels, totally new decor - and soaring sales.

"I'm not the smartest, certainly not the prettiest," says Candace Spiel, a 58-year-old franchisee. "There are a whole lot of things I'm not. But I can be persistent. I can work hard. And that's what I was on this project: I was persistent."

Riverside, population 303,000, sits in the valley of the Santa Ana River, just south of the San Bernardino Mountains and about an hour's drive from Los Angeles to the west and the desert to the east. The community, which is now almost half Hispanic, sprang up around the fruit-growing industry in the late 1800s, and the region still remains something of a citrus hub. Groves of navel oranges dot the arid, brush-covered landscape.

Candace's husband, Tom Spiel, came here to sell hamburgers. A Chicagoan by birth, he fell into a job at McDonald's the really old-fashioned way: in 1962, a family friend introduced him to the company's founder, Ray Kroc, who got the young man a job bagging French fries, then dispatched him to manage restaurants in California and finally awarded him his own franchise in 1966 - McDonald's store No. 855, in Riverside.

The neighbourhood was rough, Spiel recalled earlier this year, blighted with cheap motels. "The ladies of the night," he said, "would parade up and down the street." But his restaurant, which initially had no dining area, was a success. Spiel made a few good hires, including the woman who would later become his wife. Candace started on the job in 1972, and together the couple would come to own nine McDonald's franchises. Given the annual sales generated by the average McDonald's restaurant in the U.S., that's no small operation.

The Spiels have long been pleased, they said, with the sales at their Riverside location. Candace, however, thought the building was tired, with its hard, plastic furniture inside and its glaring, red double-mansard roof outside. By 2007, she wanted to tear the place down and start over. It was a risk many franchisees were unwilling to take at the time. The double-mansard, however kitschy, was considered part of the McDonald's brand, almost as recognizable as the arches themselves. Some franchisees didn't want to part with it; others didn't believe that redesigning or rebuilding - new buzzwords from corporate headquarters - would pay off. Even with the company offering to cover a portion of franchisee costs, owner-operators can easily spend hundreds of thousands of dollars. Remodels can cost $600,000, and rebuilds can exceed $1 million, a big request, especially in a recession.

But corporate executives were committed to the idea. At best, the old restaurants felt like a cafeteria, says Steve Norby, McDonald's vice president and general manager of the Southern California region. "You don't necessarily want to be seen in that environment," Norby told me. "You want to be seen in an environment that replicates the personality you want."

Candace Spiel shared that sentiment. And she pushed for not just new décor and a new roof but also for solar panels, L.E.D. lights and eco-toilets that used less water per flush. She got final clearance from the company and approval from the city in 2009, clearing the way to build the new restaurant in late 2010. Ideally, she said, she hoped it would increase sales by 12 per cent. Instead, the restaurant did 50 per cent better in its first week, Spiel told me, and 20 per cent better in the first year. "We were an instant hit, jam-packed inside, people waiting to get inside," she said. "We were, like, the talk of this town."

A structure by itself can't entirely explain this sort of growth. New menu items like snack wraps, Angus burgers, specialty coffees and smoothies have also helped boost sales in Riverside and elsewhere. The beverages were especially successful last year, with the company reporting 16 per cent growth in the McCafé category, thanks in part to popular items like a frozen strawberry lemonade last summer and a peppermint-mocha drink over the winter holidays.

The sales bounce the Spiels have experienced in Riverside has been repeated at other redesigned McDonald's, which are growing in number every day. In recent years, 3,000 McDonald's in the United States have been redesigned, including 900 just last year; another 1,000 or so are slated to be rebuilt or renovated this year. On average, these restaurants experience 6 to 7 per cent sales growth over the market's increase, according to McDonald's.

The Spiels' restaurant won recognition as well as more sales. At an event in January, attended by the mayor and nearly 200 others, the U.S. Green Building Council awarded the restaurant LEED gold certification, a top eco-design honour (and something of an irony, given that McDonald's is a major consumer of beef, whose production, critics say, floods the atmosphere with greenhouse gases). It was 64 degrees and sunny. The only glitch was that the clown had yet to show up.

"You're nine minutes late," Tom Spiel informed Ronald McDonald when he arrived.

"Nine minutes late?" the clown replied, smiling and cheerful. "Oh, goodness."

Ronald, decked out in a gold tuxedo, a red wig, white face paint and red, floppy shoes (size 29 EEE) with yellow laces, had awakened around 5:30 a.m. that morning and driven about 90 minutes from somewhere near Burbank with his personal assistant, David Roe, to be here for the Spiels. The clown, who declined to break character, talk about the makeup required for his job or give his real name - "He is Ronald," Roe told me, straight-faced; "that is his real name" - mugged for photographs and then finally found Candace Spiel, wrapping his arms around her in a long embrace.

"It's Ronald!" Spiel gushed.

"Hi, Candy Spiel," the clown replied. "Congratulations on everything."

The new buildings
have helped burnish McDonald's image. This is change directed at everyone (and customers have reported that the food actually tastes better in a remodeled McDonald's). On a narrower front, meanwhile, the company has also begun courting a specific, important class of customer: mothers. Central to this strategy is one of McDonald's most prominent moms, Jan Fields, the president of McDonald's U.S.A.

Fields, who is 56, assumed leadership over the company's American business nearly three years ago and soon earned the respect of her colleagues for her focused but hands-off leadership style and for her personal story. When she was 23, Fields, a young mother and the wife of a military serviceman stationed in Dayton, Ohio, got a job at McDonald's cooking French fries on the night shift. The work was harder than she expected. The smell of the fries stuck to her, she recalled, and there seemed to be so many rules. "I went home and cried," Fields said, remembering that first night. "I thought, Boy, I don't even know if I'm going to be able to make it at McDonald's."

She briefly considered quitting, she said, but thought better of it. And over the course of three decades, she worked her way up. It's a success story that, at McDonald's anyway, isn't all that unusual; countless other executives have what industry analysts like to call "ketchup in their veins." Many started with jobs behind the cash register, often earning minimum wage.

The company seems especially fond of telling Fields's story in public, perhaps because, in person, Fields doesn't come off as some scripted corporate type trying to change negative perceptions of McDonald's but as a chatty soccer mom charming wary customers with a folksiness that appears genuine. As Rick Wion put it, "Jan is just a plain old nice person." But the strategy, Wion added, isn't just about Fields's personality. "It's about the principles she's bringing to the table," he told me, "and the openness of the conversation."

Franchisees report that she's accessible. If Candace Spiel has a problem, she says she can e-mail Fields and get a reply. Fields says she even tries to answer McDonald's critics, whose e-mails make it to her in-box from time to time. "There are some that just would like us not to be in business," she told me. "What can I say?"

Fields has also made herself available to everyday mothers - especially those who happen to have blogs. The company has been reaching out to them, giving them personal access to Fields and other company V.I.P.'s and essentially trying to influence - McDonald's would say "inform," critics would say "spin" - the influencers in the blogosphere.

In mid-2010
, the company invited 15 bloggers to visit the Oak Brook headquarters, flying them and their families to Chicago, putting them up at a nice hotel and giving them the grand tour: a meeting with Fields, a chance to make McFlurries in the test kitchen, a visit to a nearby Ronald McDonald House and photo sessions for the kids with Ronald. "There was just a great deal of care taken with my family," Loralee Choate, a mother and Utah-based blogger, says of the trip. "I did not have one expense," she adds. "They even took into consideration that I was two hours away from the airport, so they sent a car to take me. It was very, very gracious of them."

According to Wion, a creator of the strategy, the premise was simple. "Bloggers, and specifically mom bloggers, talk a lot about McDonald's," he says. "They're customers. They're going to restaurants." And even more important, these women have loyal followings. Why not let them behind the curtain, hope they like what they see and let them tell readers about it? "We identified them and said: 'These are our key customers. These are key influencers for our brand,' " Wion says. "We need to make sure we're working with them."

In the blogging world, this is called brand work. In exchange for perks like free trips, access to important people and sometimes financial compensation, bloggers are encouraged or even contractually bound to write about a company, says Thales Teixeira, an assistant professor of marketing at Harvard Business School who has studied the trend. Some bloggers, he notes, get paid as much as $20,000 for the work, which by McDonald's ad-campaign standards isn't much money.

The benefits go both ways. Through bloggers, Teixeira says, corporations like McDonald's believe they are reaching an audience that has become wary of slick ad campaigns. "It's basically an advertisement sometimes but not directly from the company," Teixeira says. "Instead they are receiving it from somebody they trust."

But giving bloggers new digital cameras or vacuum cleaners in the hope that they might write about the products is somewhat different from what McDonald's is doing. Mothers, after all, are often among those most inclined to consider the healthfulness of the menu at McDonald's. By bringing them in, the company appears to be making a specific play at winning the support of a potentially sceptical demographic. And generally speaking, Teixeira says, this sort of practice is "blurring the line of P.R., and it's blurring the line of advertising."

Wion, who joined the company's public relations team two years ago, told me that McDonald's has on occasion paid travel expenses for bloggers attending conferences. But the company, he says, does not pay bloggers for content, require that they write anything specific or edit their posts in any way. The bloggers who came to Oak Brook, for example, were asked to write one post recapping their trip. "Beyond that," Wion says, "we gave them, and we wanted them to have, free rein."

The posts that followed - each accompanied by a disclaimer noting their sponsorship by McDonald's - were overwhelmingly positive, however. And late last summer, McDonald's was courting the bloggers yet again. The company sent Fields, Wion and Cindy Goody, the company's U.S. senior director of nutrition, to San Diego for the BlogHer conference, an annual meeting that last year attracted 4,100 bloggers, most of whom were women.

About 25 of them were invited to a private luncheon with Fields and other executives. The conversation there focused on the improved nutritional content of Happy Meals.
McDonald's had recently announced that it was reducing the size of the French fries and putting apple slices in every meal, changes that took effect nationally in March and that earned praise from even the company's critics.

But Fields took all questions, no matter the topic, listening to the women even if she didn't always agree with their ideas. "I heard some that probably wouldn't fly with the average person," Fields conceded later, recalling one suggestion that McDonald's make broccoli available for kids. "I'm thinking that just would not work in a Happy Meal," Fields told me. "I don't think it's universal enough yet. But red pepper might be."

Bridgette Duplantis, one of the bloggers in the room that day, was impressed. When I met with her months later over a wild berry smoothie at a McDonald's near her home in suburban New Orleans, Duplantis admitted that she still has complaints about the fast-food chain. She'd like McDonald's to offer carrot sticks for kids and more healthful, whole-grain buns. And she recognized that it was savvy marketing for the company to hold the luncheon. "Somebody like me?" the 37-year-old mother of two said. "Meeting Jan Fields from McDonald's? When does that ever happen?"

Duplantis said she felt a connection with Fields that day, something personal, mother to mother. "Now I relate to her," Duplantis told me, "and in turn I relate to McDonald's." Which means, more than likely, that the Duplantis family will be seeking out one of its restaurants for its next fast-food outing instead of going somewhere else - a small victory, perhaps, but one that McDonald's will take and try to replicate. "I know they have smoothies and they have yogurt and they have other things that my kids would want," Duplantis said. "I really couldn't tell you what Burger King's doing right now," she added with a shrug. "I have no idea."
© 2012, The New York Times News Service
Story First Published: May 04, 2012 22:19 IST

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