The Golden Arches are losing their luster – McDonald’s reported that its profits fell by 30 percent.
McDonald’s problems right now are complicated, says Jennifer Bartashus, an analyst at Bloomberg Intelligence. She says we should start by looking at the company’s target market.
“The customer profile still remains people who are in the lower income, lower-middle-income bracket,” Bratashus says.
These folks haven’t recovered from the recession and are still looking for bargains. McDonald’s problem? Meat and cheese prices are rising, which means its prices are too.
At the same time, McDonald’s is also trying to respond to changing consumer tastes by adding healthier, more expensive options – like salads and parfaits – to its menu.
“They’ve tried to be something for everyone as opposed to being everything for some people,” Bratashus says.
Bob Goldin, an analyst with Technomic, says McDonald’s is also facing increased competition from “fast casual” restaurants like Chipotle and Panera.
“I think the perception among many consumers is that it’s a fresher product and better quality,” Goldin says of the rival chains. He adds that these restaurants often cost just a few bucks more than some of the meals you find at McDonald’s.
John Gordon is an analyst at Pacific Management Consulting Group and he says McDonald’s is losing ground with another group: millennials. He says they like restaurants that let you customize your order. And McDonald’s has missed this trend, in part, because of its corporate culture.
“They’re such an insular group,” Gordon says. “They tend to think more about what the corporation wants rather than maybe what the customer wants.”
McDonald’s’ CEO Don Thompson admitted the company has to play catch-up. It’s starting by piloting menus that let you build your own burger at a few Southern California restaurants.
As we discovered, McDona’d strategy has… changed… over time. These needed to go somewhere:
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