The world’s most famous burger chain is looking to revitalise its global expansion methods by focussing closely on customer interaction and regional relevance. New products, new stores and new focus on servicing local people in a local way with local ingredients will help to rejuvenate the company’s fortunes in 2016.
The world’s largest chain of hamburger restaurants, McDonald’s, has fallen on tough times in the past few years. The global economic climate and the many criticisms that face the company on a daily basis, regarding health and hygiene, continue all over the world, despite the best efforts of the company and its marketing team.
In March 2015, Steve Easterbrook became the company’s new CEO, replacing Don Thompson who stepped down in January. The former chief brand officer and head of UK and northern Europe operations quickly went about turning the company’s fortunes around and admitted, quite frankly, that the company did recognise the issues it was facing.
“Our recent performance has been poor, the numbers don’t lie. I will not shy away from the urgent need to reset this business. Our existing organisation is inefficient and lacks clear accountability. We need to execute things better. In the last five years, the world has moved faster outside the business than inside and we cannot ignore what customers are saying when the message is clear: We’re not on our game. We need to deliver great-tasting, high-quality food with better service each and every time and we need stronger financial discipline, faster decision-making, and hard-edged accountability,” he said last year.
In South Africa, fast food is as popular as ever with the consumer goods market expected to grow to $1 trillion by the year 2020.
But here, the company has also had to field questions about quality and tailor its offerings to meet the needs to a constantly changing local market.
PURE BEEF
Any business has to ensure a quality supply chain and that the products that are sold to customers are of a high standard and this is no different for the world’s biggest restaurant business.
KFC, Burger King and Pizza Hut have all faced similar accusations, that their burgers contain nasty additives that are harmful to human health but Amesha Mohun, Quality Assurance Manager for McDonald’s SA explains that the company’s burgers contain nothing but 100% pure beef and seasoning.
“We got a lot of questions around our beef patties. At McDonald’s we are proud of the beef we serve,” she says.
The burgers are supplied by City Deep-based Finlar Fine Foods and Operations Director, Essop Dawood explains that nothing untoward is added to the product.
“The beef comes from approved raw material suppliers who are quality audited and halal certified,” he says. “We use lean forequarters and flanks which are fattier. Using a combination of lean and fat meat to get the right blend of fat level in the product will enhance the juiciness and the flavour.”
“We use 100% pure beef which is ground and then shaped and there are no fillers our additives at all in the product.”
While providing McDonald’s with a good base for business in South Africa, quality supply chain partners are often more difficult to come by in other African nations. Similarly to KFC, plans to open stores in new markets have been slowed as the company looks to build a supply chain that meets its high-quality standards.
For McDonald’s, Nigeria will be a market to attack in the future – as soon as a supply chain can be established.
“It is not about if, it’s about when,” said McDonald’s South Africa CEO, Greg Solomon, adding that McDonald’s takes a market dominance strategy to solidify its footprint and brand strongly in any new market.
“When entering a new country, whether global or African, I guess you either have to be first or you have got to be best,” he said.
REGIONAL RELEVANCE
At the end of 2015, McDonald’s SA celebrated 20 years of operations in the country and Solomon was keen to point out the impact the company has had explaining that 11,500 jobs had been created. Those employees, working at more than 230 stores around the country, are key when it comes to growing the business.
“We will always seek innovation and use the customer as the generator for change,” he told Fin24.
“We are growing nice and steadily and our next goal would be to reach 300 restaurants in SA. Then we will reset that goal even higher. We see the potential in SA. Roughly 60% of our growth will be in large urban areas, but we expect a substantial part of our growth to come from rural areas. We believe we have so far under-penetrated this market.”
As the company grows in these areas, it will look to become more relevant in differing areas and offer local people local products.
“You have to listen to your consumers and evolve your brand in that way,” says Solomon. “What we may deploy in KwaZulu-Natal to what we may deploy in Johannesburg versus in the Western Cape will be completely different product offerings.”
At group level, the company has experimented with new products such as organic burgers and kale salad bowls in a bid to remain relevant and satisfy customer demand for clean and healthy products.
“We actively strive to remain relevant to our customers and we have evolved our business as our customer’s needs have evolved. We believe that constant innovation is key to our continued success and since establishing our first restaurant in 1995 in South Africa, we have continued to amplify new innovations to the local market – like Drive-Thru which we introduced to South Africans 19 years ago, or 24/7 service and hand held Breakfast offerings to the country a few years later.
“McDonald’s restaurants are situated in locations which are convenient and easily accessible for our customers and we provide them with a menu that offers choice and great value. The future success of our business is built on our people strength, and successful partnerships, with our owner operators, our suppliers and our staff,” Solomon told the World Retail Congress.
However, there are factors that are affecting the market in South Africa, and further afield, that McDonald’s will have to take into account as it continues on its growth path.
As we have already learnt this month, the economic climate is proving to be challenging to say the least, the brand is still trying to change its reputation, there is talk of a ‘sugar tax’ being implemented (which may or may not directly affect the business) and there is lots of local competition. Other American brands, including Starbucks, Dunkin’ Doughnuts and Baskin Robbins, will all follow Domino’s Pizza which opened in SA in November, and they will all look to take share from McDonald’s and KFC.
After a better financial performance in 2015 on a global level, the company must ensure its local efforts are not hampered by overconfidence and ignorance of the local market.
“As it always has been throughout our rich history, our success will be driven, market by market, through the power of local management and franchisees working together,” said Easterbrook.
In November, it was revealed by The Economist’s Big Mac index and the Biznews community that President Jacob Zuma could afford to buy 293 Big Mac’s every day and 106,937 every year.
Developed as a light-hearted guide to determine whether currencies are at their “correct level”, the Big Mac index is now a popular measure of wealth based on the theory of purchasing-power parity.
Perhaps there’s an under-serviced market for African leaders that is waiting to be exploited.