Does McDonald’s Stand a Chance With Millennials?

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Aug. 26 (Bloomberg) -- NYU Sterns School of Business Professor J.P. Eggers and Miller Tabak & Co. Analyst Stephen Anderson discuss their outlook for McDonald’s on “Market Makers.” (Source: Bloomberg)

Anderson, an analyst, and our guest from the j.p. stern's school of business.

He specializes in corporate strategy.

What does it take for mcdonald's to get its mojo back echo mcdonald's has been struggling with how to communicate with the new generation in a lot of ways -- it is a millennial problem?

It is a millennial problem in a lot of ways.

They have been spinning their wheels.

That has created its own set of problems because they have been very inefficient.

But the reality is millennial's do not value mcdonald's products like previous generations do and they do not have the same relationship with the brand.

That is extraordinary.

But did they ever?

Sure they did.

Not with millennial's, but young people, no question.


But mcdonald's is geared toward low income white males, right?

Mcdonald's has been targeting children for generations.

My own two children, mcdonald's is one of the top rants that they like.

They still go for the happy meal.

They still go for the happy meal, but once they turn into between's and teens, i think the relationship -- into tweens and teen, i think the relationship gets broken.

If you go back to the basis of cleanliness, efficiency, and speed -- on those mcdonald's can come back.

If you look at the menu.

-- at the menu, in the 1950's, mcdonald's only had nine menu items.

Now they have close to 50. i think that is why there are problems with execution and restaurants.

Is mcdonald's trying to do too much, please steal while many people?

I think they are.

They need to decide if they are going to play to their core, or are they going to play to this new generation with new products?

They have been trying to do both, and firms tend to struggle when they try to do two different things at the same time.

Do they expand and grow or focus on their core?

Why are we hating so much on mcdonald's for being so bad at this when they have good things about them.

25% of their revenue comes from breakfast.

They own that market.

They're working on customization.

That is a good thing for consumers.

She mentioned breakfast.

In the wake of the tim hortons merger this morning, it will be vital that mcdonald's continue its a game in the breakfast space.

Tim hortons, the chain itself, you will probably see a lot more units in the u.s. so it will be important for mcdonald's to keep up its competitive advantage in this space.

Should mcdonald's take a page from the big oil playbook?

They figured out a few years ago it does not make sense really to be in an alternative energy or renewables play.

Do what you are good at.

Natural grass -- natural gas extraction.

That is what we do.

Burgers are going to be here for a long time.

We are good at it.

Why don't we stick to that?

Can i just say for a moment how erik was able to correlate oil and burgers?

We have really reached a point where they have the choice between adjusting to adapting to new needs and wants, or bringing consumers to what they are good at.

To the extent they can bring to simmer's to the core, that is a great business plan.

If they are looking long-term, it is time to look at other options other than expanding in the mcdonald's footprint.

Maybe it will be fast casual with mcdonald's word folio is a better option.

What does that wind up looking like?

I think mcdonald's is top of mind.

Off the bat, we see the trends affecting them other -- more than other players.

But mcdonald's has so much history and success based on a branding relationship with its consumers.

The changing relationships with netflix and streaming video and things like that have interrupted the ability of big random names to build brand reputations, especially -- big brand names to build brand reputations, especially with millennial's. do they need to take a page from five guys?

Five guys may be too much of a competitor.

Look at fast casual in the same space.

Look at aaa five years ago.

It makes sense.

I understand why aaa did not want to -- chipotle did not want to maintain that relationship.

What do you think?

Is fast casual the way to go?

I am not sure that i agree with that statement.

One of the reasons i think they got out of that business was to return to the core in the early 2000's, and that is what you saw a return to same restaurant sales growth by the mid-2000's. we want to see chipotle.

Mcdonald's is not going to have that growth.

They are not going to be chipotle.

So, what will consumers be satisfied with in the quick service space?

You want to see strong growth, along with strong same restaurant sales growth.

That has to come with a more aggressive or a rethinking of their market strategy.

Does that mean get out of the u.s.? certainly if we are looking at growth from a mcdonald's perspective, the best options will be outside the u.s. given the challenges with the younger generations where we have quickly reached over situation with -- oversaturation with mcdonald's in the u.s. -- i think if we are looking at the idea that mcdonald's is entering a mature phase as a company in some ways, that is a harvesting period to some extent.

We should be looking at operational effectiveness, returned to the core.

Gross maybe does not become the number one priority, especially in the u.s. market.

People talk about how good burger king is with operational efficiency.

Are they that much better than mcdonald's episode but they have certainly made improvements under three g capital's leadership.

It gives them an additional tests.

Mcdonald's has catching up to do in that regard.

But everyone has the same problem.

Where do you grow organically?

You can only rely on your product so much.

Everyone has the same issue as to who do you go out to.

What products do you show?

Spending is not what it was coming out of a few years to cover it, so it is really a market share battle.

It may be too early to throw the baby out with the bathwater, but at what point do people start pointing fingers at the ceo?

I would point to two things.

If they continue to try new things and continue to have to scrap them, new products, new marketing strategy, whatever it is, if they continue to have to scrap them, that is a clear sign of a leadership problem.

If there is a return to the existing business, but they are unable to amp up the profitability in that environment and show that they are doing it unsuccessfully.

One of the things i wonder about mcdonald's is why do people not reward them more -- fc has this problem, right?

Why do they not reward mcdonald's more for the "good" things it has try to do.

People say -- i am not sure if it is true -- mcdonald's has better quality ingredients.

I put salads on the menu.

They try to be healthy.

They get nothing out of it.

The ceo don thompson said that salads do not get much more than 3% of total sales.

My question goes back to the issue of menu bloat.

If they can go back to the menu items that have worked well for them in the past.

Also, the more menu items you have, the longer it takes to make, and it is called fast casual.

It is not take 10 minutes and get your food.

That is part of the issue.

And they did name a new usa president, right?

They did.

-- they did.

And that is returning back to the core.

The revolving door is already starting to spend underneath thompson.

My question -- he has only been ceo since the middle of 2012. it is perhaps a little bit early.

Eventually those questions will start dogging the ceo.


A real pleasure to talk.

Thank you so much.

And of course steve -- and of course, steve anderson.

This text has been automatically generated. It may not be 100% accurate.


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