Last September Burger King was sold to private equity firm 3G Capital in a deal valued at $3.26bn (£2.1bn), after having struggled significantly with the crisis and having projected weaker than expected demand for the rest of the year. In the meantime, its main competitor, Mc Donalds reached an all time high share value due to its sales performance.
Why do we have such a big difference in performance? Why is the recession not hitting both chains in the same way? Hasn´t the BK campaign “Have it your way” worked as expected?
As usual the response is complex but could be understood by the Marketing Strategy that both companies have in place, and specially with how they have coped with the crisis.
The first  reason has to do with SEGMENTATION and TARGETING. Mc Donalds is mainly targeting Families that, during the crisis, has not suffered as much as the 18-34 year old segment of BK, that has specially been affected by unemployment.
Second reason should be found in the PRODUCT OFFER. While Mc Donalds has worked significantly in diversifying their menus (betting aggressively on alternative dishes like chicken and salads), BK has kept on pushing burgers, ensuring that theirs were best in class. Something that could have worked properly in a scenario where the price for beef had not increased significantly, and there had not been a switch in the taste of consumers, that are now looking for more “healthy” dishes.
Third and fourth reasons could be found in PRICING AND PROMOTION. BK has launched new combos (termed special offers) that turned out to be new product offerings, at very special prices. A movement that could partially offset the sales drop by retaining customers that could have opted for more pricey choices but, had had eventually led to a cannibalization . Moreover, a sort of contradiction was created for, on the one hand they were positioning as best-in-class burger suppliers (with campaigns like “Have it your way”), while on the other one they were advertising heavily their unbeatable affordable combos.
And last but not least, it had also been an issue of DISTRIBUTION. Not really about Distribution Deployment and Franchise Management, but of being unable to optimize the capital spent in their shops, introducing new menus and offerings for the whole day. Which has not been the case of Mc Donalds, that have successfully launched breakfast and brunch offers to ensure more traffic and consumption per customer, in a successful effort to maximize the return on assets and increase the CVE.
Quite a few reasons as you can see. I am aware that some of the points are not that easy to tackle with and require some time to take place and level off. But unfortunately, under the current situation it is not enough to be the King of the Burger Kindgom. You need to be the King of the Inn.
THINK DIFFERENT!!!
Ignacio Gafo
Comments