Big Mac at 30 no longer the burger king
One of the world's most successful corporations is in turmoil. Profits are flat, market share is falling and a damaging guerrilla war is being waged against the chain by its sworn rival, Burger King. McDonald's, say industry analysts, has lost its way.
With the company at a crossroads, convulsed by angst about its future, the death last month of one of its two American founders seemed peculiarly symbolic. Dick McDonald opened the first fast-food restaurant with his brother, Mac, in 1940.
His demise prompted not only mourning within the corporation, but also a rush of nostalgia for the days when the pace of life was slower, French fries cost 10 cents and McDonald's was unchallenged king of the burger world. Yet McDonald's has transformed the planet, marching into every corner of the globe, throwing up its yellow arches in 111 countries, serving up homogenised meals everywhere from Seoul to San Salvador and, in 1968, inventing the Big Mac.
For decades, the burger chain has been happy to recite the facts and figures that underpin its phenomenal success - more than 23,000 outlets worldwide, and a new one opening every three hours; beef from nearly 1 per cent of the world's cattle placed between the company's sesame seed buns; and annual sales of pounds 20bn, making McDonald's the second-most recognised brand on Earth, after Coca Cola.
But growth outside the United States is slowing. In America, still the most important market, profits have hardly changed in the past three years. Sales growth there has stopped keeping pace with restaurant openings, signalling the prospect of the ultimate nightmare - saturation.
McDonald's has also lost market share to Burger King and Wendy's, its two biggest competitors. Burger King has deployed its new Big King sandwich, which it claims has 75 per cent more beef and less bread than a Big Mac. McDonald's has tried to fight back with the Arch Deluxe, but the product has made little impact.
A promotion offering Big Macs for 55 cents was unpopular, because it was not made clear customers had to buy other, full-priced food to qualify.
The result of all this has been a painful senior management shake-up that culminated in the departure earlier this summer of the corporation's chief executive, Michael Quinlan - the man, who, according to a NatWest analyst, Damon Brundage, "presided over the demise of one of the great brands in the history of American business".
His replacement and former head of the US arm, Jack Greenberg, plans to restore the firm's fortunes by addressing the basics. "We need to get back to our roots," he declared, "to drive the growth of this business through innovation."
Mr Greenberg said his mission was to "reinvent" fast food by developing new products for the McDonald's repertoire. In America, eight items are being tested, including the Big Xtra, a burger with lettuce and tomato, fried strips of chicken breast called Chicken Selects, and a range of breakfast bagel sandwiches, one containing steak, egg and cheese.
Some observers point to the company's acquisition of a stake in Chipotle Mexican Grill, a small Mexican restaurant chain in America. Mr Greenberg would say only that he could not rule out the prospect of burgers served with salsa and Mexican cheese.
One can only guess at what Dick and Mac McDonald would have made of such exotic products. When they first went into business together, opening a small drive-in barbecue restaurant in the dusty Californian town of San Bernadino, their intention was to make $1 million by the time they were 50.
The place proved a hit, partly thanks to the golden arches they erected on the roof of the building to catch the attention of passing cars. By 1954, they had eight restaurants and several franchises.
But it was another man, Ray Kroc, a milkshake machine salesman, who was responsible for creating the global McDonald's empire. He bought the US franchise rights then the whole business. Kroc's first McDonald's, in Des Plaines, Illinois, opened in April 1955 and is now preserved as a museum.
In Britain, the appetite for burgers and fries has proved prodigious since the first McDonald's opened in Woolwich, south-east London, in 1974. The company's UK chairman claimed that Woolwich was a cultural microcosm, saying: "If the British are going to love McDonald's, they are going to love them in Woolwich first."
The hamburger cost 18p back then, but it was the same formula of beef patty crowned with pickle, ketchup and mayonnaise, slapped between two sesame seed buns. There are now 870 restaurants in the United Kingdom.
It may be that Mr Greenberg's back-to-basics strategy will reap rewards for this huge, profit-hungry corporation, enabling it to colonise remote areas as yet unscathed by the yellow logo and to gobble up an even bigger share of global expenditure.
But he should remember that first principles are not always the best. The Big Mac started out as the Big Boy. Fortunately, someone had the good sense to change the name.
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