McDonald’s move into mochas and iced lattes helped the fast food chain report its seventh consecutive month of increases in global comparable sales this year, underscoring the resilience of its business model in the recession.
The company’s shares rose 1.7 per cent in midday trading on Monday to $56.16 after it said comparable stores sales rose 4.3 per cent in July, down from an increase of 8 per cent a year earlier but beating analysts’ consensus expectations of a 3.2 per cent increase and ahead of June’s 2.6 per cent rise.
Jason West, analyst at Deutsche Bank, said the global sales increase alleviated concern about a possible “downward spiral” in comparable sales, as has been seen at some of McDonald’s competitors, like Burger King. “Globally, they have not had a negative month [in sales] in several years.”
Sales were up 2.6 per cent in the US, which contributes around half of the company’s profits, due to strong sales of coffees and core menu items like hamburgers and fries.
McDonald’s expansion into fancy coffees under the branding “McCafé” is part of a strategy to capture more customers at breakfast time and win customers over from coffee chains to its lower-priced drinks. The move has forced Starbucks to defend its brand – the coffee chain has been running marketing campaigns with the slogan: “It’s not just coffee. It’s Starbucks.”
In the US, McDonald’s is selling espressos and mochas in its existing stores. In Europe, it is emulating its Australian business and opening separate McCafé counters (which operate within or next to regular McDonald’s restaurants) and plans to have some 1,200 McCafés in Europe by the end of the year.
The group’s strongest sales were in Europe, up 7.2 per cent due to the popularity of its “tiered menu” – which offers cheap, middling and expensive options – as well as summer specials like chicken, bacon and onion sandwiches in France and burgers based on the “great tastes of America” in the UK.
These include a “New York special” which contains beef, streaky bacon, smoked cheese, lettuce, onions and onion mayonnaise in a chilli, chive and sesame bun.
In Asia-Pacific, Middle East and Africa, sales were up 2.1 per cent. McDonald’s attributed the rise to the “creativity” of its Australian business, which runs quarterly marketing campaigns based on a single theme (the current theme is “family”) and has introduced apple and cinnamon mini-muffins and spinach feta strudels as well as opening more 24-hour and drive-throught stores