A supersized pipeline created an operational headache for the McDonald’s Corp., which blamed “too many new products, too fast” for disappointing fiscal results.
With last year’s additions of Premium McWraps, the Egg White Delight, new Quarter Pounder burgers and a flurry of limited-time offers, the hamburger chain said its ambitious innovation efforts caused complexity in its restaurants.
“One of the things we did last year … we overcomplicated the restaurants,” said Tim Fenton, chief operating officer of McDonald’s, during a Jan. 23 call with financial analysts to discuss fiscal-year results. “If you remember, we introduced McWraps, we introduced Egg White Delight, we introduced Quarter Pounder toppers, and really didn’t give the restaurants an opportunity to breathe.”
Click to enlarge an infographic of McDonald’s many launches in 2013.
After suffering a “stall” in innovation in 2012, McDonald’s last March revealed plans to increase product introductions across its entire portfolio of categories.
“It’s about energy, excitement and innovativeness in the menu pipeline,” said Don Thompson, president and chief executive officer, during a March 13 presentation at the UBS Global Consumer Conference. “We never want our menu to become stale.”
The strategy admittedly backfired, and now the company is honing its focus yet again.
“We introduced a number of significant new products and limited-time offers at a quick pace that challenged more effective restaurant and marketing execution,” Mr. Thompson said during the Jan. 23 call. “Our 2014 menu and marketing strategies better balance affordability with core products, new choices and limited-time offers.”
McDonald’s hopes to achieve this in part with the Dollar Menu & More, which debuted in November and was designed to increase traffic by offering greater value while boosting restaurant profitability.
“We’ve also adjusted the sequencing of product introductions, making it easier for restaurant teams to execute especially when it comes to training and staffing,” Mr. Thompson said.
Fewer products also means faster throughput, Mr. Fenton added.
“That allows us really to have more capacity during our peak hours where we haven’t been able to, particularly in some of our drive-through restaurants, serve as quickly and fulfill the capacity that we wanted,” he said. “So, fewer products is better.”
Burger King made a similar decision last year to refine its pipeline with “fewer and more impactful launches.” During an Oct. 28 earnings call, Alex Macedo, president of the North America region for Burger King Worldwide, said: “We’ve been working so much with the franchisees, and really getting a better feel for the business in this competitive moment, that we feel very strongly, that to be able to have success in this competitive environment, it’s important to focus on the few right things.”
In that spirit, McDonald’s aims to reconnect with its customers, who made fewer visits to the fast-food chain in the fourth quarter. Comparable sales in the United States slid 1.4% during the fourth quarter and 0.2% during the year, falling short of expectations.
“Guest traffic was down across major segments, reflecting initiatives that didn’t resonate as strongly with consumers amid a sluggish (informal eating out) industry,” Mr. Thompson said. “An additional change that’s under way hones in on our brand strategies as we work to better resonate with customers.”
As part of efforts to retool its marketing strategy, the company this week announced the appointment of Deborah Wahl as chief marketing officer for McDonald’s U.S. business.
McDonald’s also plans to reestablish breakfast in the U.S. market by emphasizing its McCafe coffee platform, which the company said drives traffic during the day part.
Though the chain already has projected flat sales for January, it hopes the new approaches to menu innovation and marketing will improve its position in a continued challenging marketplace.
“This is going to be a market share battle and a market share battle game in order for us to move the business but we believe we have the right strategies and the right focus at local levels in the markets to achieve the goals that we have,” Mr. Thompson said.
