Food

It Could Be Peak Big Mac. Or Just a Strong Dollar.

McDonald's revenue fell again despite the debut of all-day breakfast. Fortunately for the fast-food giant, there's a catch.

Still yummy.

Photographer: Jason Alden/Bloomberg

McDonald's Corp. reported earnings on Monday. The news was ... OK.

The introduction of all-day breakfast in the U.S., source of some growth and much rejoicing a year ago, appears to have played itself out, with domestic same-store sales falling 1.3 percent in the final quarter of 2016. One consultant to McDonald's franchisees told BuzzFeed that breakfast all the time was starting to look like "a huge flop." Outside the U.S., though, things were looking better, with same-store sales in its "international lead markets" (Australia, Canada, France, Germany, U.K.) up 2.8 percent.

The most striking thing to me in the earnings numbers, though, was that in 2016, for the third year in a row, McDonald's brought in less revenue than it did the year before. Put that in a chart and it kind of looks like we may have reached -- and passed -- peak Big Mac.

After the Peak

McDonald's annual revenue

Source: Bloomberg

The revenue decline since 2013 appears to be unprecedented. 1 I don't have ready access to numbers going back to 1965, when the company went public, but my sense is that McDonald's had been growing pretty much uninterrupted since Ray Kroc took control in the late 1950s (no, I haven't seen the movie yet, but I do plan to go). Now, it's shrinking.

This is enough to lead a person to start ruminating on the rise and fall of great powers, the passing of the American century, and other such weighty matters. McDonald's was among the most potent symbols of both the post-World-War-II, car-dominated lifestyle in the U.S. and the cultural clout of the U.S. overseas. And whaddya know: That other potent symbol, Coca-Cola, has seen revenue fall every year since 2012 (its full-year 2016 numbers won't be out until next month, but analysts expect another decline). At home in the U.S., both companies are struggling with the perception (and to some extent the reality) that their products are health hazards. Abroad there's that, plus the possibly waning attraction of the American way of life. If McDonald's really is at the beginning of a great retrenchment, it will mark the end of an era -- and could also pose some serious problems for that indispensable measure of purchasing power around the world, the Big Mac index.
 
There is one big complication in this straightforward saga of growth and decline: the dollar. McDonald's got two-thirds of its 2016 revenue from outside the U.S. The strong dollar of the past two years has been depressing the dollar value of those overseas sales. So I adjusted McDonald's non-U.S. revenue with the Federal Reserve's broad trade-weighted dollar index, and got this:

OK, Maybe Not a Peak

McDonald's revenue, adjusted by broad trade-weighted dollar index

Source: Bloomberg

That still shows a decline since 2014, but it's nowhere near as dramatic. Maybe we have reached peak Big Mac, with all the attendant implications. But it appears to be a little early to tell.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

  1. I ran an inflation-adjusted version of the numbers just to be sure, and that too showed no precedent for the decline of the past three years.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

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