With Sales Stagnant, McDonald's Q4 Hinges On The Return Of The McRib
McDonald's is having a crisis. Its sales are flat, Millennials are choosing Starbucks and Chipotle instead, and the company wants to shake up its advertising — again.
All that puts a whole lot of pressure on the McRib, the fans-only mystery-meat sandwich which McDonald's traditionally rolls out in Q4.
After making a host of changes this past year to win over the elusive millennial consumer, McDonald's is now thinking about diverting some of its $1.4 billion marketing budget from agencies Leo Burnett and DDB, according to a report from Ad Age.
Though a spokeswoman from McDonald's told Ad Age the company is not entertaining other agencies, Janney analyst Mark Kalinowski wrote the following in a note to investors the day after McDonald's investor meeting last week:
"We believe that some of the creative [national TV ads] that have aired in recent quarters in the U.S. have not resonated as well with McDonald's customer base as the company would like to see. While this is not the only challenge McDonald's faces in the U.S., it is one of them, and to combat it there have been some internal personnel changes. We would also not rule out the possibility of ad-agency changes at some point."
The news comes at a time when McDonald's is hoping to reverse a sales decline that began during the early part of 2012. The company has rolled out a slew of new products recently in hopes of reversing this trend, including the McWrap to appeal to health-conscious young people and the failed Mighty Wings to spice up its menu.
Now it lies to the fourth quarter of the year to determine whether McDonald's can improve on its rather stagnant same-store sales growth of just 0.7% in the United States in the past quarter. By comparison another large chain with a seemingly saturated market, Starbucks, reported U.S. same-store sales growth of 8% this past quarter.
That's where the McRib comes in. Since McDonald's doesn't do Christmas or Thanksgiving dinner, the annual wintertime rollout of the beloved pork sandwich is what's known as the company's "secret weapon." If the sandwich can be a hit once again, McDonald's could see an uptick in its U.S. sales, a surge that would no doubt come as a relief to DDB and Leo Burnett, regardless of whether McDonald's has in fact put them on notice.
The agencies will have their hands full, though, after a rather unappetizing photo of a white, frozen McRib spread like wildfire across the internet earlier this month.
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