McDonald's Post Worst Sales Decline in Years

Michele Warg
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McDonald's sales declined sharply in August 2014 because of supplier controversies in China, marking the worst monthly sales figures for the fast food giant since February 2003. Sales in Asian, Middle Eastern and African markets dipped 14.5 percent, and sales for restaurants in the United States fell 2.8 percent. The chain continues to face challenges from competition and because of younger consumers who seek better food options.

McDonald's has more than 2,000 restaurants in China, where meat supplier Shanghai Husi Food allegedly sold expired meat to fast food chains in the country. Chinese authorities accused the supplier of selling bad meat after a television station ran a story on the issue. McDonald's sales in Asia declined after the controversy, and the company had to lower future earnings forecasts by as much as 20 cents per share for the third quarter.

The restaurant chain has more than just an image problem in Asian markets. McDonald's sales numbers fell across the board, even in its home market. Millennials, the generation of consumers in their pre-teens to early 30s, have yet to embrace the marketing strategy of the once-revered brand. Younger consumers want fresh food, better choices and more taste. The latest strategy to earn back more revenue employs Apple Pay, a new service that lets iPhone users with an iTunes account pay for food at the counter or in a drive through. Apple Pay hits McDonald's in October 2014.


McDonald's is also trying to improve staffing in its restaurants to reduce wait times during busy hours. Expect new sales strategies in the near future as the chain's top marketing executive recently departed the company. McDonald's sales figures need to turn around soon before its stock falls even further. Before the controversy in China, stock prices were nearly $102 per share. Since then, the stock has fallen more than $10 per share, and the company has lost 10 percent of its value in just three months. The last time McDonald's stock was this low was January 2013, more than 18 months ago.

Will the current changes be enough to turn McDonald's sales numbers around? Sales of its chicken wings in late 2013 did not seem to change the minds of consumers, considering KFC, Popeye's and Buffalo Wild Wings already have such products on the market. Perhaps McDonald's needs to completely rethink its strategy moving forward. The company already tried salads, a dollar menu and large sodas for just a dollar. Maybe a new marketing executive, someone in his 30s, is what McDonald's needs.

Maintaining a successful business can be likened to the survival of a species--diversity helps weather the ebb and flow of change. Until younger consumers see something different from the company, McDonald's sales numbers may continue to struggle. Gimmicks such as products available elsewhere, more minimum-wage workers and cheap sodas have already failed. If McDonald's wants to change, it needs to alter its entire company philosophy so consumers perceive the company in a more positive way.

 

Photo courtesy of tiverylucky at FreeDigitalPhotos.net


 

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