That place where Coke Tastes SO good
Ronald McDonald is one happy mascot today — the McDees new Big Mac menu, $1 soft drinks and $2 coffees seems to be working its magic as McDonald’s shares hit an all-time high after it reported “stellar” first quarter results. Global same-store sales increased 4% while that of US increased 1.7% as the “health conscious” Americans rushed to grab the All Day Breakfast offerings.
In his book, “Rich Dad, Poor Dad”, author Robert Kiyosaki talks about Roy Kroc, founder of McDonald’s. Back in the ’70s, Roy Kroc was meeting a bunch of MBA students in Austin, Texas when he quipped them to answer, “What business am I in?” The standard answer followed, that of a hamburger business. Ray chuckled and said, “Ladies and gentlemen, I’m not in the hamburger business. My business is real estate.”
McDonald’s primary business has always been to sell hamburger franchises, but what was never lost sight of was the location of each franchise — the land and the location were the most significant factors in the success of a McDee.
McDonald’s today is probably the largest single owner of real estate in the world, owning even more than the Catholic church. It owns some of the most valuable intersections and street corners around the world.
McDonald’s had revolutionized the fast food concept in the early ’70s through its convenient drive-thrus for the baby boomer generation but is fast losing ground to the present millennials generation (it lost 500 million customers in the last 5 years).
It is in this backdrop that McDonald’s new business focus is of interest. Earlier last month, McDonald’s announced a new strategy to win back these lost customers by introducing mobile app ordering and delivery; what it calls fancy marketing gibberish Global Growth Plan
Earnings Fizzles
As American’s interest in sugary drinks is at an all-time 31-year low, and its quest to conquer new emerging markets is on a slippery slope thanks to geographic uncertainties and currency volatilities, Coca-Cola is finding it increasingly hard to impress Wall St.
The soda giant reported its 8th straight quarterly revenue decline with an 11% drop in revenues as it is focused on cutting costs and working on refranchising its American bottling units.
Will their fortunes improve with the new CEO taking charge next week? He’s bringing in a Chief Growth Officer and a Chief Innovation Officer — two new posts that report to him.
Can it compete against PepsiCo in the non-soda, healthy drink category where Pepsi has a bigger offering than Coke? As an AlphaStreet user noted, 45% of Pepsi’s quarterly revenue came from “guilt free products”
Realistically, we might have to wait it out for one more year to see Coke come out of its slump. Till then, we can enjoy Hulk and Ant-Man battling it out for a Coke Mini
Quesarito Conundrum
The E-Coli and norovirus infestor tacos & burritos major Chipotle is staging a rebound after a near disastrous 2-year streak of outbreaks by reaching out to its customers by splurging on traditional advertising with a promise of only “fresh” ingredients.
It seems to have worked in the first quarter of this year, as Chipotle reported comparable same store sales going up by 17.8% and operating margins also improving to 17.7% from 6.8%.However, the management sprang a surprise in the late Tuesday evening on its earnings call which we were listening to by subtly announcing about an “unauthorized activity on its network that supports payment processing for purchases made in its restaurants”!
The management discouraged any follow-up questions on this and said the breach occurred between March 24th and April 18th of this year and an investigation is currently on with the support of Cyber Security firms, Law Enforcement, and Payments Processor.
Let’s just hope it was a minor breach as another customer backlash will make matters worse for Chipotle!
