‘We’ve amassed a massive marketing budget’: McDonald’s prepares for 2020 catch-up advertising
After a handful of global shutdowns, McDonald’s has “nearly all” of its restaurants operating after moving quickly to meet new retail demands. While the disruption has undermined profit margins, the fast-food giant remains keen to open up its marketing war chest in the second half of 2020 to make up for lost time.
The chain has embraced the “3D model” – drive-thru, delivery and digital – to survive. Drive-thru accounted for up to 90% of sales in the United States when dining halls were closed.
The second-quarter results offered some optimism about what comes next after its latest results failed. Here’s what you need to know.
finance
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Quarterly revenue fell nearly a third year-on-year, from $5.41 billion to $3.76 billion.
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US revenues are threatened by the rise of the virus, but European markets (like the UK, are reopening).
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The company reported net income of $483.8 million in the second quarter, compared with $1.52 billion year-on-year.
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Global same store sales decreased 23.9%
Covid-19 effect
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94% of sites had reopened partial operations by the end of the second quarter. The company says the sales recovery is healthy in many of those locations.
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Sites in the UK, Spain, France and Italy were completely closed for extended periods during the quarter. Now, thanks to “drive-thru penetration”, 70% of sites in its five largest international markets (Australia, Canada, France, Germany and the UK) are operating. McDonald’s chief executive Chris Kempczinski said: “This safe and convenient channel of service has been particularly attractive to our customers during the pandemic.”
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He saw “continued improvement in our results throughout the second quarter as markets reopened around the world.”
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It is threatened by high unemployment, a surge in home cooking and competition within home delivery platforms. Additionally, in lockdown scenarios, the appeal of fries and burgers may not have the same influence they once had on busy commuters.
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In China, leading the Covid-19 chain, the recovery has slowed as “customers remained wary of social activities…We now expect this more subdued pattern to continue.” continue in 2021″.
What to expect from the marketing budget
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Q2 marketing savings should be reinvested in Q3 and Q4. During the second quarter, most major markets “significantly reduced” their spending. In the United States, marketing spend fell by 70%, because “we chose to keep our weeks until the situation stabilizes”.
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Kempczinski said, “We’ve amassed a significant marketing budget just to invest in the second half of 2020.”
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“McDonald’s will also invest an additional $200 million in marketing spend in our U.S. and international carrier markets in the second half to accelerate the recovery. This equates to an additional month of media in each market. These actions will result in a significant increase in our marketing spend for the rest of the year.”
Shares of the company fell more than 2% in premarket trading.
