Despite reporting a slight increase in overall sales for November, McDonald's financial results also showed some declines in key markets. The company's US sales fell for the third consecutive month, while sales in China also suffered a slump after previously robust growth. McDonald's will need to act quickly in order to ensure that these downwards trends do not become established.
For the month of November, overall sales at McDonald's experienced an increase of 0.7% when compared to the same period last year, but more detailed analysis reveals some potential problems for the global fast food chain and possibly the industry as a whole. In particular, sales at US restaurants declined 0.6%, while McDonald's performance in some emerging markets, perhaps most notably China, was also weak. However, operations in Europe posted a 2.5% increase, with strong performance in the UK and France offsetting a gloomy month in Germany.
During the recession, many fast food chains have continued to post encouraging results with sales climbing as consumers returned to fast food for both price and nostalgia reasons. McDonald's third successive monthly sales decline in the US could be evidence that consumers are now cutting back even further on their eating out expenses.
McDonald's has achieved strong growth through its breakfast menu in recent years, as its fast food format allowed many consumers to pick up something convenient on their way to work. However, during the recession, many consumers have returned to eating breakfast at home in a bid to cut costs. This is likely to become an established behavior that will prove difficult to reverse during economic recovery.
Many established global chains have successfully offset losses in established markets such as the UK and the US with robust growth in emerging markets. However, McDonald's reported a decline of 1.0% on its business in Asia-Pacific, Middle East and Africa. Previously, operations in these regions posted strong sales growth of 13.2% in November 2008, but some 'fast-food-fatigue' could now be setting in among consumers in these countries.
A monthly set of figures alone cannot be seen as a catastrophe for the fast food industry and sales overall have actually increased for McDonald's. However, these latest numbers show a downward trend in many markets that will need to be arrested. Particularly during recessionary times, behaviors anchored around abstention can become entrenched in the consumer mindset very quickly. McDonald's and the fast food industry as a whole will need to remain competitive in the market in order to continue to drive growth.
Datamonitor: Global Fast Food
Datamonitor: Fast Food in Asia-Pacific
Datamonitor: Fast Food in the United States