McDonald’s eschews ‘silver bullet’ price promotions as sales increase

McDonald’s says its decision to not run high levels of price promotional activity as a short-term driver of growth has helped it return 14% increase in revenue.

Speaking on a call with investors today (27 July) the company’s chief financial officer Ian Borden acknowledged the macroeconomic environment has been and continues to be challenging, with consumer sentiment softening in many markets.

Borden praised the company’s franchisees’ willingness to not look for short-term boosts from lower pricing in the short term, “because they understand we’re in this together we’re both making investments to ensure that the success of our business is long-term focused”.

The company has seen success from this strategy, with global comparable sales increasing 11.7% year-over-year in the three months to the end of June. Revenues also rose by 14% to $6.5bn (£5.1bn) versus the same period in 2022.

That success is “not being driven by one-off promotions. It’s not being driven by just silver bullets,” CEO Chris Kempczinski said.

The company is instead focusing on “long-term” success; for example, by deploying marketing to maintain and build its brand.

The most recent quarter acted as “evidence of where we continue to up our game from a marketing standpoint”, Kempczinski said. The company has been on a transformation process, ‘Accelerating the Arches’, part of which has involved elevating marketing as a key lever of driving long-term growth.

The more customers love our brand, the more they love our food.

Chris Kempczinski, McDonald’s

Speaking to Marketing Week last month, Joan Colletta, senior director, marketing transformation and a member of the global brand leadership team said McDonald’s has put marketing at “the centre of the business strategy” in recent years.

Indeed, speaking to investors today CFO Borden stated “brand was at the centre of the quarter”.

One example of “the power of marketing” at McDonald’s given during the call was the success of the return of brand character Grimace in the US. The company celebrated the character 52nd birthday with a special meal and milkshake available in its American restaurants. The character has garnered over 3 billion views on TikTok.

The campaign to celebrate Chicken McNuggets’ 40th birthday in the UK was also recognised by the company’s leadership during the call. The UK team was also praised for “performing well” amid “some of the worst consumer sentiment in Europe”.

While the UK team’s efforts in generating growth was praised by leadership, the business has been under increased scrutiny in the UK. Earlier this month, the BBC reported that more than 100 workers, some as young as 17, have alleged they had been groped and harassed while in employment at the company.

While Kempczinski claimed today the brand “has never been in a better place”, it has taken a hit in health in the UK, suggests YouGov’s BrandIndex tool.

YouGov’s BrandIndex shows a decline in McDonald’s index score, which combines measures like impression, value, and recommend scores. The first allegations were published on 18 July. On the day before this, McDonald’s BrandIndex score was 9.3, by 24 July this had declined to -1.4. As of yesterday it had recovered somewhat to 2.6.