McDonald’s increases marketing budget by $200 million to spur recovery

Diving brief:

• McDonald’s plans to increase its marketing spend for the rest of the year by $200 million, a month off its usual spending, as the burger chain plans to recover from pandemic shutdowns. The increase comes after the company cut marketing spending by 70% in the second quarter, giving it a “considerable marketing war chest” for the third and fourth quarters, Chris Kempczinski, chairman, said this week. and CEO of McDonald’s. in a quarterly earnings call.
• McDonald’s marketing will focus on affordability and value amid consumer anxiety over an economic downturn, he said. The channel will shift from a “defensive posture” that characterized its promotional efforts in the second quarter that included a “Thank You Meal” program for first responders on the front lines of the coronavirus pandemic, Ad Exchange reported.
• McDonald’s spent more than $200 million in the first half to help franchisees advertise as the pandemic negatively affected sales. Global same-store sales fell 24% in the second quarter from a year earlier, while total revenue fell 30% to $3.76 billion, according to its earnings report.

Overview of the dive:

McDonald’s plans to increase marketing spending for the second half as the burger chain seeks to fuel a recovery from a sales slump that was likely among the worst in the company’s 65-year history. With an additional $200 million to spend on marketing in the second half of the year, McDonald’s will likely be more aggressive with its promotional activity that emphasizes affordability and value for consumers facing economic uncertainty.

Giant QSR joined other big advertisers Coca-Cola and Unilever in recently pledging to double its marketing investments in the second half after a period when budgets were mostly suspended due to the coronavirus pandemic. These adjustments could give a much-needed boost to the advertising industry, which has seen its revenue forecast for the year revised downwards due to the health crisis.

In the second half, McDonald’s will focus on what CEO Kempczinski described as “the three Ds: drive-thru, delivery and digital” that have helped sustain sales during the pandemic. In the United States, McDonald’s generated nearly 90% of its sales from its drive-thru, while less than 10% came from delivery as dining rooms were closed. The company began reopening dining rooms in the United States with limited seating, ending the quarter with 2,000 of its nearly 14,000 locations open. McDonald’s will permanently close 200 locations in the US this year, more than half of which are ‘low-volume restaurants’ in Walmart stores, as part of an ongoing plan.

McDonald’s plans to increase marketing spending come as the company saw signs of improvement each month in the second quarter. Total sales fell 39% in April from a year earlier, but the drop of 21% in May and 12% in June indicated that the business was gaining momentum as restaurants reopened in the world, AdExchanger reported. The company started the quarter with about 75% of its restaurants open and ended the period with nearly all of them open, according to its call. A major challenge will be its breakfast until more consumers return to work.

McDonald’s was one of the big companies that quietly stopped advertising on Facebook without officially participating in a boycott of the social network’s policies on removing hate speech, according to an analysis by a media monitoring group. The boycott officially began after the end of the second quarter, and it remains to be seen how many companies will resume advertising on Facebook next month. Prior to the pandemic, McDonald’s had been active with promotions that included the national deployment of its “McDelivery” service Last year. As management indicated on its Q2 call, delivery service will be a priority area for promotions in the second half.