Food Business News - June 12, 2018 - 12
NEW YORK - The successful embrace of
technological change while still providing consumers the experience they
demand will stand as the most important determinant of success in the food
service sector over the next five years,
said Stephen J. Easterbrook, president
and chief executive officer of McDonald's
Corp., Oak Brook, Ill.
Warning that the restaurant business is overbuilt and is poised to become
hypercompetitive in the years ahead,
Mr. Easterbrook offered insights into the
outlook during the Sanford C. Bernstein
Strategic Decisions Conference May 30 in
The observations came at the end of
the discussion and were part of a spirited
back and forth with Sara Harkavy Senatore,
a senior research analyst at Bernstein.
Ms. Senatore asked Mr. Easterbrook
to look five years in the future and identify what will be the single most disruptive
force in the industry.
Mr. Easterbrook: "We will be."
Ms. Senatore: "McDonald's. That's
a good answer. Okay, so maybe what
should your peers do?"
Mr. Easterbrook: "I wish them all
More seriously, Mr. Easterbook
said analytics and data are playing an
increasingly disruptive role in business
"I mean, the world has never moved
quicker than it is today," he said. "And you
can see the bricks-and-mortar retailers
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are fighting hard to maintain their share
and/or sometimes to survive. I think the
restaurant industry broadly is slightly
oversupplied at the moment. Whatever
growth is coming out there typically is
coming from new unit additions. That
means people are losing volumes, and that
equation never ends up in a happy place."
Structural change in the industry
inevitably will result with competitors
fighting harder and harder to prevail.
"I think trying to get that balance
right between the physical experience
and the technological relationship -
getting that balance right will ultimately
shape the winners and the losers, and it's
something that we're very focused on," he
said. "We're investing in both skill set and
capability. And also just the fundamental
Twenty million customers in the U.S. have
registered on McDonald's mobile app.
A third of McDonald's
offer home delivery.
rapid pace of change
technology platforms that we believe are
going to help us become a winner in that
fight. But I think the world will look a pretty different place in five years' time."
Mr. Easterbrook, who has been c.e.o.
of McDonald's since January 2015, has
been credited with reigniting growth
at the company. He noted the company
has enjoyed 11 consecutive quarters of
top-line growth. Many elements were
incorporated into the company's Velocity
Growth Plan aimed at enhancing the
customer experience, including the
menu and customer engagement. Layered atop the plan were what Mr. Easterbrook called "accelerators," that include
initiatives around digital, home delivery
and the modernization of McDonald's
stores around the United States.
Discussing the McDonald's mobile
app, Mr. Easterbrook said 20 million customers are registered in the United States.
"You want that monthly average
user number to keep growing, and you
also want the frequency of this to engage
with you through technology to increase," he said.
As an example, the company is
communicating about its everyday value
meal offers through the app. McDonald's
continues to experiment with ways to "get
that sweet spot" of regular engagement
with consumers, Mr. Easterbrook said.
The parley with Ms. Senatore
included considerable discussion about
home delivery and restaurant updates,
dubbed Experience of the Future.
The company has opted to use
third-party services for its home delivery, principally UberEATS. Mr. Easterbrook said partnering with such services
has allowed McDonald's to deploy home
delivery much more rapidly. Currently, a
third of McDonald's restaurants worldwide offer home delivery.
"It's been a great business because
it's been incremental," said Kevin M.
Ozan, McDonald's vice-president and
chief financial officer, who also participated in the discussion. "In general it's
about 70% of incremental business."
He noted that delivery is heaviest in
the evening, which is when the company
has excess capacity.
"So, that's a big positive from an
June 12, 2018