McDonald's McCafes began as an experiment in Australia, but they have becoming increasingly popular in the U.S., Europe and now China.
Almost 35,000 restaurants. In 119 countries. Serving 60 million guests every day.
Yes, we’re talking about McDonald’s.
Somewhat amazingly the world’s biggest restaurant chain is still finding new ways to expand. With 14,000 restaurants in the U.S., McDonald’s Corp. has reached near-saturation status domestically, thus the vast majority of its growth is in emerging international markets.
Being widely recognized as a U.S. chain, McDonald’s faces more challenges in those regions where America has not yet shed its reputation as ‘arrogant imperialist.’ Be it for political, religious or social reasons, disdain for the Land of Liberty remains high, and the intrusion of American culture is often frowned upon.
But somehow McDonald’s is managing to overcome the negative stereotypes associated with its native land and, for the most part, has been highly successful in its foreign markets. Why? Because the only American values McDonald’s suggests are convenience and thrift – two things that just about every global citizen holds dear.
From the Middle East to Europe to Asia, McDonald’s has mixed these core values with local tastes to create a restaurant the community will support. And it must be doing something right--at the annual shareholder meeting in May, McDonald’s CEO Don Thompson announced that at least 1,500 new restaurants are set to open this year.
“It’s really become more of a global brand in the eyes of consumers,” said fast food marketing expert Darren Tristano of Technomic Inc. in Chicago. “Internationally the golden arches have a different meaning than just another American company.”
So what, then, do the golden arches mean to global consumers? Tristano said people value McDonald’s because it is consistent in providing “relevant quality at a reasonable price point.”
Middle East: McDonald’s is not America
McDonald’s marketing decisions in the Middle East are careful and deliberate. The ultimate message is this: McDonald’s respects and values your culture.
In many Middle Eastern countries, McDonald’s makes sure to offer menu items that are within the Muslim Halal diet, which prohibits eating pork, among other things. The company also markets itself as being very family-focused since family is of utmost importance in many of those cultures.
In Oman, for example, McDonald’s recently launched a new menu item called the Share Box. The large box contains four sandwiches, some McNuggets, two large fries and four medium drinks. It is designed for groups or families to, well, share.
Ali Daud, president of McDonald’s Oman, had this to say: “McDonald’s has always been a family restaurant, and the Share Box truly embodies the idea of coming together as a family, or as a group of friends to share a meal and an experience together. It’s about giving our customers more opportunities to share in a simple, enjoyable, affordable way.”
At a recent restaurant opening in Oman, McDonald’s threw a huge cultural event complete with magic shows, music and face painting. This was an effort to provide a fun occasion for families and position itself as a restaurant that cares about the community.
Of McDonald’s 1,000 restaurants in the Middle East and Africa, 375 are in the Persian Gulf region. All of the Persian Gulf McDonald’s are owned and run by local people. This is one key way the company makes sure it stays in touch with the various cultures in which it operates. It also is important that customers know when they enter a McDonald’s that they will be dealing with employees and managers who speak their language.
Still, McDonald’s faces obstacles to establishing brand credibility in countries where “America” can be dirty word. “There are parts of the world that…continue to be a difficult place for American companies to operate,” Tristano said.
Egyptian resident Shady Mikhael said there are three McDonald’s restaurants close to his home in Giza. The chain’s presence sparked controversy in the past.
“They are known for being very American,” Mikhael said. He remembers when, in 1997, a number of Egyptian McDonald’s restaurants were destroyed by angry political mobs.
“But ever since [McDonald’s has] tried to deliver the message that all those who work in McDonald's Egypt are Egyptian and that the meat is Halal and all the components are made in Egypt.”
Today McDonald’s has a fine reputation there, according to Mikhael, even though most people in the wider region express contempt for U.S. support of Israel. He said in Egypt he eats at McDonald’s a few times a month. “I find it delicious and the price is relatively convenient,” he said.
Despite the risk of McDonald’s becoming a terrorist target in the Middle East, the company and most experts are optimistic about the company’s presence and potential for growth in the region. So while you won’t find a McDonald’s in Libya or Syria or Iraq at present, the chain has trickled in to a number of Middle Eastern countries such as Lebanon, Jordan and Saudi Arabia.
“I think in the Middle East there’s a lot of demand,” Tristano said. “[McDonald’s] will be one of the brands that fills the needs there. They’ve been relatively successful in every country so it’s hard to imagine the Middle East would be any different.”
Europe: Pleasing the proud
In Europe McDonald’s task is to get food elitists – particularly the French and Italians – to accept McDonald’s. The rise of the McCafe has been a huge part of the process.
“In Europe the McCafe concept is really successful,” Tristano said. “Because European consumers not only want the quality, but they also appreciate the occasion, and the experience, and the interaction they have.”
It comes down to figuring out what works in different countries, using the trial-and-error method. In France, for instance, McDonald’s salads sell well, whereas in the U.S. they do not.
McDonald’s recent partnership with the Italian pasta-maker Barilla is one experiment where the outcome remains to be determined. The notion of serving Barilla pasta at McDonald’s restaurants in Italy caused a rather strong reaction from some Europeans.
Online comments following the announcement included rants like this one: “Being associated with the grossest fast food merchant and purveyor of fat, sugar and salt in the world can't be a great marketing move for Barilla. Others may have shorter memories, I certainly won't ever buy another packet of their pasta.”
Other commenters took an optimistic view: “If this tie-up results in more people eating more healthy food, fantastic.”
Who knows – maybe McSpaghetti will take off.
Asia: Expansion mode
Then there’s Asia, where American chains are typically welcomed with open arms, despite political tensions between the U.S. and some countries in the region. At the McDonald’s annual meeting in May, Chief Operating Officer Tim Fenton said Asia is where the company is expanding most.
He mentioned plans to open the first McDonald’s restaurants in Vietnam and added that the company is hiring 75,000 new employees in China this year. At present China represents just 3 percent of McDonald’s total sales, but the company expects that to change over the next decade.
“China’s a great market for us,” Fenton told shareholders. “It’s the fastest growing market we have. By this time next year we’ll have 2,000 restaurants there.”
China is the second-fastest country to reach the 2,000-restaurant mark (the U.S. was first). The number of McCafes in China is set to increase by 45 percent this year, helped by the country’s preexisting tea culture.
In China McDonald’s is perceived quite differently than it is in the U.S. There it is seen as trendy to eat McDonald’s. Tristano argues that’s because the restaurant’s there are new to the scene and have a lot of desirable amenities.
“They’re seen as more upscale,” Tristano said. “These newer stores are going to come with that perception…because it’s more modern, more contemporary and certainly new.”
A look at menu items in Asia shows the company wants McDonald’s to be more than just a familiar restaurant for American tourists. McDonald’s struck gold with items such as the seaweed-flavored French fries in China and the masala burger in India (masala is a mixture of spices common in South Asian cuisine).
Rituparna Basak, a college student in Calcutta, India, said crossover items such as the masala burger give McDonald’s a much wider appeal.
“Not many people can adapt to the western food,” she said. “So an Indian touch to the western food makes it more appealing and convenient to a particular section of the society, mainly the people who are not much exposed to the Western culture.”
McDonald’s, she added, is most popular among young people. And as more women are joining the workforce, there is less time to cook traditional dinners. “A proper Indian meal consists of quite many dishes and needs a lot of time for its preparation,” Basak said. “People hardly get time to cook in their homes.”
The need for speedier meal options is growing. McDonald’s is already poised to step in and meet this demand in India as the nation’s culture transitions.
Will there come a day when McDonald’s is physically unable to keep growing? Experts like Tristano think it’s possible but still a ways off. If any chain can do it, though, it’s probably McDonald’s.
Despite increasing competition in emerging markets as other chains swoop in, McDonald’s will benefit from being there first. “They may become more relevant to those consumers and eat away at the early advantage McDonald’s has had at building its brand,” Tristano said.
But to compete with McDonald’s, other American chains will need to demonstrate the same respect for local cultures that McDonald’s does, he adds.