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The business of food.
Angus Makes McD's Look Classy
By Dan Mitchell
Posted Thursday, July 2, 2009 - 2:17pm
Value meals have helped catapult McDonald's (MCD) to megasuccess during this recession, but the company is not content to draw only price-conscious consumers. It wants hungry young men just as badly as Burger King, Taco Bell, and all its other competitors do.
That's why McDonald's invested so heavily in its new Angus burger, which debuts nationwide today. Priced at about $4 and weighing at one-third of a pound (pre-cooked), the burgers are being advertised as "premium" and thus, just like the McCafe, are meant in part to convey the message that McDonald's isn't just a place for broke people to scarf cheap eats.
That, in fact, is the last thing McDonald's wants people to think. Throughout the recession, the company's executives have been baldly lying about the reasons for its burgeoning revenues. And you can't blame them. After all, the recession will end, and when it does, the fast-food purveyors that are offering higher-priced, higher-quality fare will be well positioned to take advantage of the resulting higher margins.
And in the meantime, of course, everyone knows that you can also go to McDonald's to scarf cheap eats.
It's win-win, though not without some risk. The Angus was conceived about two years ago when times were good. According to Bloomberg News, franchisees asked the company for something to help them compete with local burger joints and regional chains that offered higher-quality fare.
But the Angus meant that stores needed some new equipment, at a time when franchisees were already spending big to install McCafes. Then the recession hit.
Further, there is the risk that the Angus will eat into sales of Big Macs and Quarter Pounders, the mainstays of McDonald's offerings to hungry young men with money.
"The Angus is going to upsell someone who would have bought a Big Mac or Quarter Pounder," food consultant Darren Tristano told Bloomberg. "It's less likely to attract new customers than cannibalize existing ones."
Maybe. But it sounds like the Angus burgers, being made from higher-quality beef than the rest of McDonald's burgers, will be far tastier, and, if they're good enough, may well pull customers from other burger shops. The burgers also offer toppings not available on its other burgers: rings of red onions, sautéed mushrooms, full bacon slices and Swiss cheese, all served on a high-quality roll.
And McDonald's says its trials in several U.S. cities showed that such cannibalization didn't occur. And even if it does occur in the national rollout, the margins are higher for the Angus burger, so McDonald's still wins.
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EmailObnoxious Fast-Food Ad of the Week: Hardee's
By Dan Mitchell
Posted Wednesday, July 1, 2009 - 11:20am
Last time, it was Burger King (BKC) explicitly referring to oral sex in a print ad in Singapore. Now it's Hardee's getting people to repeatedly say "A-Holes" in a TV spot for its Biscuit Holes, which are some kind of awful fried, greasy dough-and-sugar things. The ad agency responsble is Mendelsohn Zien. The ad shows people in the street participating in a taste test, where they are asked to choose between the "A-Holes" and the "B-Holes." Get it?
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Hardee's has also created a Web site (built entirely on Flash, of course, so it takes forever to load and is nearly unusable), Name Our Holes, where a video shows purportedly "real" people suggesting names for the product. "Bisticles," one man suggests. A woman suggests "Creamy Balls." The people at Hardee's do know they're selling food, right?
CKE Restaurants, owner of both Hardee's and Carl's Jr. (which has its own set of puerile ads, also by Mendelsohn Zien) saw same-store sales fall by 5.2 percent in the four weeks ending June 15. In its first fiscal quarter, profits fell 13 percent. In September, its stock was trading at $13.96. Tuesday morning, it was trading at $8.78.
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Food Order Wrong? Call the Cops!
By Dan Mitchell
Posted Tuesday, June 30, 2009 - 1:40pm
I would never risk bringing down the wrath of Jack Shafer by calling something a "trend" without having data to back it up. So I don't know whether more people are calling 911 to complain about their fast-food orders or whether we're just hearing more such reports.
We do know that it has happened several times recently, with at least three such incidents just this year.
Perhaps the most famous one, though, was when a California woman sought emergency help in 2005 after a local Burger King got her kid's cheeseburger order wrong. In a display that, as snopes.com put it "fulfills all the stereotypes of the narcissistic, pompous, self-absorbed Orange County soccer mom," the woman told the dispatcher she called the police "because you're supposed to protect me." Sadly, she was turned back. "Ma'am, we're not going to come down there and enforce your Western Bacon Cheeseburger," she was told.
The audio of the call became a favorite Internet meme.
More recently, Jean Fortune, 66, called 911 in February from the drive-through lane of a Burger King in Boynton Beach, Fla. because the restaurant did not have lemonade. "Customer service," the dispatcher informed him "is not a reason to call 911. 911 is if you're dying. Do you understand that?"
Apparently, he did not and was arrested.
In March, Latreasa Goodman called 911 three times because, she said, McDonald's employees in Fort Pierce, Fla., told her they were out of McNuggets. She had already paid for her McNugget meal, and employees told her she could something else off the menu, but they could not refund her money.
Despite this atrocity, Goodman sounds strangely calm in her calls to 911. TMZ branded her "McNut," and Perez Hilton described her as "loco 4 pollo."
She was given a summons to appear in court for misusing 911.
Later, she told WPBF-TV that she was embarrassed by the whole thing. Still, she said, when "you feel that you've been mistreated or misused or robbed out of your money, you have the right to call 911. That's the purpose of 911, so I thought."
McDonald's, though, admitted it was wrong to not issue her a refund. So they did, along with an apology.
And it just keeps happening. On Saturday, Jeremy Lloyd Martin, 23, was charged with improper use of 911 in Clakamas County, Ore. He called to complain that his order was not complete and was told to pull around to obtain the missing food. He was told it wasn't a police matter. But then he called back and demanded the presence of a police officer. "This is a 911 emergency," he said. "I got robbed for eight dollars."
"Well, arrest me at (expletive) 82nd and Sunnyside Road," he responded, according to KATU News. "Please send a cop right now. I swear to God all my life ..." Apparently, he was unable to finish his sentence, perhaps having been cut off by the dispatcher. Then he called again as did a McDonald's (MCD) employee who told police that Martin and two other men were screaming at employees through the window.
What I want to know is, should I call 911 on the morons blowing off M-80s across the street every night?
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Grocers Forced to React to Wal-Mart. Again.
By Dan Mitchell
Posted Monday, June 29, 2009 - 2:55pm
Wal-Mart's (WMT) massive effort to attract wealthier customers is working so far, and it spells potential big trouble for other grocers, according to an examination of the chain's "Project Impact" initiative by Supermarket News.
Project Impact carries "considerable risk for Wal-Mart," according to the long article (not available online), but if it succeeds, "slugging it out with a more sophisticated and focused giant could very well be daunting."
"It's the second twist of the knife. For most supermarkets, the first twist was all the supercenters getting built, but now there's just that much more competition from them," David S. Rogers, president of DSR Marketing Systems, told SN.
Wal-Mart's customer base has been growing more affluent as the recession has dragged on and wealthier consumers have tried to save money. The timing couldn't be better for Project Impact, announced late last year. The effort involves spending billion of dollars on remodeling stores to make them more attractive to the new bargain-hunters; reducing the number of items available in stores to reduce clutter and cut costs, and introducing more well-known brands.
Wal-Mart, the world's largest grocer, has changed its longtime slogan from "Always Low Prices. Always." to "Save Money, Live Better." It's not abandoning its image as a place to buy cheap stuff; it's adding to it so as to avoid turning off its new customers, many of whom have long thought of Wal-Mart as a shoddy store where angry moms hit their screeching kids and where people shop for a dozen 2-liter bottles of diet Fanta root beer at a time.
Competing supermarkets have been struggling against Wal-Mart since the mid-'90s, when the chain grew massively, offering ultra-cheap groceries. Competing on price was necessary, but not sufficient. And not always possible, given that Kroger, Safeway and the rest couldn't begin to compete with Wal-Mart on cost, given the massive chain's massive economies of scale. Better strategies involved emphasizing quality and offering more selection.
Now competing chains have to revamp their strategies again, according to David Orgel Supermarket News' editor-in-chief.
He offers several bits of advice:
• Wal-Mart is eliminating many items. Find out what they are and offer them.
• Meet Wal-Mart's store upgrades head-on, and do the same. Competing chains have an advantage here, since most of them aren't starting from the Soviet-style atmosphere Wal-Mart stores are starting from.
• Stay with the "in the ballpark" pricing strategy that many grocers have employed against Wal-Mart. The chain still can't be beat on this front, Orgel notes, but Project Impact is actually adding to Wal-Mart's costs in the short term, which could be an opportunity for many competitors.
Above all, Orgel says, grocers "should act quickly on these opportunities. Wal-Mart may be distracted in the short term by its massive shifts, but at some point it will fine-tune its approach."
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Putin Bashes Food Prices
By Dan Mitchell
Posted Friday, June 26, 2009 - 2:18pm
You can pretend to take the man out of the party, but you can't pretend to take the party out of the man.
Russians are up in arms over rising food prices. Prime Minister Vladimir Putin is using their ire to make himself appear to be in touch with the masses and to try to forestall any anti-government backlash. He has taken to haranguing executives in public, as if they were to blame for Russia's sick economy.
Yesterday, he went to a supermarket with executives of food companies, retail managers, Cabinet ministers, and television crews in tow.
"Why do your sausages cost 240 rubles ($7.50)? Do you call that normal?" Putin asked the PR manager of X5 Retail, the company that owns Perekryostok, a midmarket chain. "But they're good-quality sausages," responded the PR guy, Yuri Koboladze, pointing out that there were lesser sausages going for 49 rubles. Putin wasn't convinced.
Following this display, Perekryostok announced a "Grand Sale."
A couple of weeks ago, Putin publicly humiliated oligarch Oleg Deripaska, formerly Russia's richest person, for not paying the workers at a cement factory Deripaska had recently shut down. Then Putin contemptuously tossed a pen at him and ordered him sign papers to pay the wages. (There was no Corleone-like "your brains or your signature" threat, at least not explicitly.) "And now give me my pen back," Putin said.
Afterward, Deripaska berated the Russian government for its mishandling of the economy.
In the Soviet days, of course, the government would have simply ordered that prices be lowered or factories reopened (and we all know how effective that was). These days, Putin apparently believes central planning is best imposed through bullying media stunts.
But as the Telegraph reports: "Such gestures, while popular, are unlikely to reverse the slump, analysts say. The World Bank this week predicted that over six million Russians will fall into poverty this year as the economy shrinks by 8 percent."
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Burger King Blows Its Marketing Wad
By Dan Mitchell
Posted Wednesday, June 24, 2009 - 9:47am
Burger King's (BKC)Â increasingly obnoxious attempts to lure young dopes to its horrible food may have gone too far this time. Some (likely slightly older) dopes have come up with a print ad shamelessly evoking oral sex to peddle the "BK Super Seven Incher" in Singapore.
I can't help but imagine a fellow in a backward ball cap and cargo shorts, his pockets full of roofies, writing this copy for the oblong sandwich:
IT'LL BLOW YOUR MIND AWAY. Fill your desire for something long, juicy and flame-grilled with the NEW BK SUPER SEVEN INCHER. Yearn for more after you taste the mind-blowing burger that comes with a single beef patty, topped with American cheese, crispy onions and the A1 Thick and Hearty Steak Sauce.
They got two "blows" in there. Nice. The sandwich (by itself an obscenity), slathered in unnaturally ultra-white mayonnaise, is floating in the air directly across from the disturbingly pale profile of a young, gape-mouthed woman who looks frightened to death of the manly meat. Sexy!
But, now, wait a minute. Let's look at that copy again. The ad is aimed at young men, right? Of course it is. So why does it tell them to "fill your desire for something long," etc.? Is that a purposeful bit of sublimation (know your audience!) or is our cargo-pantsed copy jockey himself like one of those guys from my high school's wrestling team—that is, even more of a stereotypical frat boy than I had at first imagined?
Hard to know.
As I noted the other day, Burger King's weird, often stupid/sometimes clever campaigns have helped to lift the chain from its depths of about a half-decade ago. But, in the United States, anyway, they haven't helped it close the widening gap between it and McDonald's (MCD), which has stuck with a more normal, value-oriented, and much more successful marketing approach.
Copyranter calls it the "most overtly blow-jobby ad I've ever seen." And copyranter has seen a lot of blow-jobby ads.
Gawker notes that the "only thing this ad is missing is the disclaimer that you'll actually get fewer blowjobs if you eat these sandwiches, but perhaps that's the 'genius' of advertising that we simpletons on the outside just don't get."
(NOTE: Like everyone else who has written about this, I initially blamed the ad campaign on Crispin Porter & Bogusky, the agency that handles Burger King's ads in the United States. Although this latest campaign, apparently limited to Singapore, seems to fit in, sort of, with Crispin Porter's other campaigns aimed at young men, a Crispin Porter spokeswoman has confirmed that another agency is responsible for it. I have updated this post to omit references to Crispin Porter. )
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