McDonald's focused on gaining market share through product launches

McDonald's sales were hit in Q1 as economic headwinds challenged every market around the world. Global comp sales were down 1 percent versus last year's first quarter.

Broken down by segment, comp sales decreased 1.2 percent in the U.S. In Europe, sales were down 1.1 percent, and in Asia/Pacific, Middle East and Africa (APMEA), sales were down 3.3 percent.

"While there are mixed signs of a slow recovery in the U.S., significant headwinds persist as consumer confidence continues to waver," CEO Don Thompson said during Friday's earnings call. "Persistently high unemployment rates and ongoing austerity measures in Europe and soft macroeconomic conditions in APMEA are pressuring consumer purchasing power as well."

The company expects such pressures to linger through Q2, on top of new challenges such as the avian flu in China, which has affected chicken consumption.


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Despite the negative numbers, however, the company's executives are optimistic about McDonald's gain in market share in the busy QSR segment.

"While our sales were negative, we outperformed the competitive set and increased market share. This reflects our ability to continue differentiating our brand despite declines in the (informal eating out) category," Thompson said.

Product pipeline 'more robust' today 

McDonald's hopes to continue gaining traffic and market share through its product pipeline. CFO Peter Bensen said that in a soft economy, the company is willing to sacrifice a little bit of margin to maintain traffic and grow market share.

"In this environment where you continue to have the cost pressures, yet you have soft economics, the battle for market share becomes so critical to the long term health of the business," Bensen said. "(Franchisees) understand the importance of driving traffic in this environment and taking market share. If the industry isn't growing, taking market share means we're taking guests from other restaurants. And in this environment, that is what we have to do to win."

In the U.S., McDonald's estimates it outperformed its competition by about 1.4 percent in Q1. Food promotions will continue to be a priority throughout the year, with four key categories in focus: chicken, premium beef, breakfast and beverages.

"From a competitive set, we're going to perform well and our food promotions are really solid. We have brought better food news and stronger value to the marketplace," Thompson said. "Today, our product pipeline is more robust from a global perspective."

Nearly half of this year's launches will come from existing products around the world, including the recently introduced Chicken McWrap, which was originally rolled out in Europe. Tim Fenton, chief operating officer, said "great products travel well across different borders."

Some global examples of McDonald's products that were successful in Q1 include: France's Casse-Croute sandwich, which helped the chain compete with local bakeries in that country; Germany's beef or chicken Western burgers; deli choices, including a Cajun crispy chicken sandwich in the United Kingdom; and spicy wraps and rolls in Russia.

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