Is McDonald’s Brand Really in Danger?
Stocksaints – Shares of McDonald’s (MCD) are sitting at a 52-Week high despite recent concerns from investors that the hamburger giant is beginning to lose its appeal among the “millennium generation”, which is widely seen as the company’s next big consumer base. But these concerns seem overdone.
The company, which figured out a way to preserve it empire against the likes of Subway, by continually altering its menu to include more healthy options, is seen as struggling to do the same with “millennials.” But is McDonald’s really unprepared to address the needs of a critical growing population?
However, though, I don’t think this is strictly a McDonald’s issue; it’s something that the entire services industry, which includes Wendy’s (WEN) and Burger King (BKW) should be concerned about. Having a strong understanding of demographic consumption trends is key component towards staying ahead of the curve. These rivals don’t take this lightly.
To that end, McDonald’s recently decided to drop a few items off its menu, including chicken selects and the fruits & walnut salad. The company is hoping to prolong what appears to be a revival in its stock price, which has gained 9% so far on the year after a lackluster 2012.
Here again, McDonald’s ability to adapt continues to make a difference. That said, the climate in 2013 is not going to get any easier. Last month McDonald’s announced a 2% decline in global comps, with U.S. being the only one among the geographic regions showing growth. Comps are the metric that tracks sales performances of stores that have been opened at least one year.
This means one of two things: either the competition is taking a toll, or the economic slowdown abroad has gotten worse. But I don’t think this is reflective solely on any particular demographic. In the meantime, I think McDonald’s emphasis on value and its unique promotional food events will help to drive more traffic as it continues to reimage it restaurants.
The company’s recent attention on menu items is the first step in returning value to shareholders. Everything else will take care of itself. Let’s not forget, McDonald’s addressed the needs of the Baby Boomers as well as the Generation X demographic. So in light of concerns with the “millennials,” I don’t believe the company will suddenly forget how to serve.
Disclosure: At the time of publication, Richard held no positions in any of the companies mentioned.