McDonald's to stress value in marketing strategy

This is in response to a decline in the second quarter

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Many markets in Europe are experiencing a slowdown in guest traffic, but McDonald’s is faring better than the competition, Thompson said. The systems in the United Kingdom, France and Spain gained market share in the quarter, while Germany and Italy maintained market share.

Russia was one of the segment’s strongest performers based on its focus on breakfast, lunch and beverages, officials said. In the coming months, France would increase its marketing expenditures for its Petit Plaisirs value menu, while Germany hopes to sustain momentum for its McDeal combo meals, which cost slightly less than 4 euros.

But officials reiterated that McDonald’s would have to consistently advertise its value messaging, as lower consumer confidence likely would persist across the continent.

“Now that the downturn has persisted for so long — and in Europe, gotten so much deeper — it’s starting to constrain consumer behavior,” Bensen said. “In some markets, the informal-eating-out market is just declining, and the magnitude of issues in Europe is having ripple effects around the world. All in all, it means more flattish-to-declining eating out around the world.”

Sign of traction in APMEA

Some of the chain’s biggest markets in the Asia/Pacific, Middle East and Africa, or APMEA, division are starting to see a contraction in dining out. McDonald’s is fighting back with promotions to drive traffic and began value initiatives in Australia earlier in the year; the strategy began to take root in the second quarter, Thompson said.

Australian customers began shifting some of their use of the Loose Change value menu toward higher-than-average-check purchases like Extra Value Meals.

When Loose Change was introduced at the end of the first quarter, it drove traffic increases but significantly compressed the brand’s average check. Now that Loose Change’s mix of sales has leveled off from initial levels, Thompson is confident that Australia can build long-term sales momentum from the menu and hopefully serve as a model for other major markets.

“Typically, when you bring forward a new value platform, customers sometimes think it will go away, so they’ll use that menu much more initially,” Thompson said. “That does wane, and sometimes that takes six months to happen, sometimes a little less.”

The brand is in the early stages of a new multi-tier value platform in Japan, where post-tsunami energy restrictions continue to constrict the eating-out market. McDonald’s also is trying to balance the value offer with new-beverage news, sampling iced coffee that has been adapted from the McCafe product in the United States.

McDonald’s is feeling the effects of slower growth in China particularly because the brand is concentrated in Tier 1 coastal cities where consumer spending and operating costs are worsening, Thompson said.

“We’re seeing more media and marketing around value products [in China], and we’re in a good position there relative to the overall marketplace,” he said. “It has to be consistent when you execute value, and if our value lunch and dinner and breakfast programs do well, we’ll do well.”

Oak Brook, Ill.-based McDonald’s operates or franchises more than 33,500 restaurants worldwide, including more than 14,000 in the United States.

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