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McDonald's plans to shrink menu, ingredient lists
McDonald's has moved from a division structure to a structure that empowers regions to execute their marketing and menu plans toward their specific demographics.
December 11, 2014 by Alicia Kelso — Editor, QSRWeb.com
As part of its turnaround bid, McDonald's has a bold vision for the immediate future, outlined by its recently-announced McDonald's Experience of the Future initiative. Plenty of details about that initiative have surfaced in recent weeks, including an expansion of the Create Your Taste platform, and "consumer-led" innovation efforts.
CEO Don Thompson and USA President Mike Andres provided even more details during the company's investor event Wednesday, including the removal of a chunk of menu items and a messaging focus geared toward moms.
Among the highlights:
Menu simplification. The biggest news to come out of Wednesday's presentation was the planned removal of eight menu items from the menu. The company is also removing five Extra Value Menu items, going from 16 to 11.
"We have added over 100 SKUs in the past 10 years," Andres said. And, although that has generated $770,000 in sales for the average restaurant during that same time, it has complicated things both for crew members and customers.
McDonald's has tested the smaller menu "considerably" and has found that there was not a "degradation in the sales piece," Andres said.
"The future suggests we can continue to simplify our base menu and we all recognize that about 80 percent of our sales are coming from a small subset of the menu," he said. "And in the future, new product news will come around this customization idea. That is one of the beauties of the Create Your Taste idea is we don’t need to have a big menu board to offer variety. Variety is determined by the customer themselves, individually."
Thompson added that this move will not include high-margin, high sales items. It will also be determined by local markets.
"If I am certain that in one part of the country, certain sauces sell more, that doesn't mean I need it in every single restaurant," Thompson said. "Some sandwiches may resonate in one area and some may elsewhere."
The executives cautioned that they will move carefully on this simplification effort to make sure it doesn't impact franchisees' bottom lines. McDonald's is also removing items in its London and Germany restaurants.
"We have a larger opportunity in the US because of the drive-thru. You don't want the customer to be confused as they're coming through the drive-thru," Thompson said. "It will defeat any media messaging you're putting behind an item. Also, it helps operationally and simplifies the menu for customers and that's really the driver behind this."
McDonald's will also consider changes to its ingredients list.
"We're a restaurant company. We must win with our food. We must align our food story around the consumer's definition of quality and focus on enhancing the appeal of our core products," Andres said. "That includes looking at new cooking technologies and holding procedures. We're focused on innovation, whether that's through customization or simply adding new ingredients to create menu news."
A challenge comes with the volume of inventory at the chain. Andres said, however, changes will be swift.
"Why do we need to have preservatives in our food? We probably don't. We are challenging the way we thought of things in the past and that starts with being basic: Why is this ingredient in it, why do we need it, is there an alternative we can use?" Andres said. "Then, we need to talk about it."
Marketing will be a big piece of this initiative.
"Taste will always be paramount, but we have to design products that are easy to make and make sure they hold well. In the future, we'll be much more culinary inspired and think about our ingredient lists as being much smaller," Andres said.
Local, local, local.McDonald's is putting more control back into the hands of its vast owner/operator base and encouraging menu promotions based on each individual market preference.
Andres said this will be driven by deep insights on each market. For example, the average IEO consumer in the Northeast is a 50-plus adult with a higher income, compared to a 35 year old lower income adult in the Southeast. The Mighty Wings promotion, for example, fell shy of national expectations, but did "phenomenal" in some markets.
"The real work, the real impact is what our local markets can do to drive a plan that will address the diversity of the marketplace," he said. "This idea – of how we plan locally to supplement our national marketing – is really starting to ignite the entrepreneurial spirit."
McDonald's moved from a division structure to a structure that empowers regions. The organizational changes allow the chain to be "more sophisticated" locally, Andres said.
"We are putting accountability of winning market share back into the local markets," he said. "There is no one-size fits all plan. We're looking for bunts and singles to move the business forward and we're starting to see energy around that."
To complement this local push, marketing will hone in on moms – "reclaiming mom," as Andres explained. McDonald's recently hired a new SVP of Consumer Insights to help with the reorganization process from national to local. The company will help markets use those insights effectively, as well as predictive analytics tools.
"We've got years of data to help them understand what their specific consumers respond to and what is best for their market play," Andres said. "That is the way we have to do business in the future."
Multiple order point strategies. "There will be changes in our service models as we work to create more memorable experiences around convenience," Thompson said. "You'll hear us talk a lot more about multiple order point strategies, which includes self-order kiosks, table service, mobile ordering, web ordering and mobile payment."
The goal is to shift the way consumers interact with the brand and make it easier for them to do so.
New pricing strategies. Andres said there has been too much disparity between McDonald's entry, core and premium offerings, which has affected the brand's overall perception.
"The Dollar Menu has served us very well, but its pricing relationship has moved customers naturally to lower-priced items. This has contributed to some decline in quality perceptions. People are basing (those perceptions) on our value items and, while they're great products, they're not the Big Mac," he said.
Consumer preferences. The consumers are driving every single one of these changes at McDonald's. Andres said they have redefined quality and are focusing more on wellness. Fast casual competitors, he adds, are taking the lead on creating quality, fresh perceptions, and the chain has found itself playing catch up.
"The pace of change outside of McDonald's has moved faster than it has internally," he said. "But if we can eliminate the perceptions of quality questions we get compared to our new competitors, then we win on easy and value. People always are going to look for value and what makes their life easier. Value isn't a trend, it's here to stay. Those are the things we've fallen behind on and we'll catch up quickly."
Photo provided by Wikipedia.
