By Annie Gasparro
The battle for burger sales should intensify this year as
struggling McDonald's Corp. grapples with changing consumer tastes,
cooling sales--and a more formidable competitor.
McDonald's business suffered throughout 2014. In November, for
example, monthly sales at established locations in the U.S. fell
4.6%--the worst performance in more than 14 years.
Under pressure from franchisees and some shareholders, the
world's largest restaurant chain by revenue announced plans in
December to upgrade its ingredients and add more customized
ordering to appeal to younger consumers and to pare back a bloated
menu that has slowed its service. The simple-yet-customizable
approach has worked well for competitors like Chipotle Mexican
Grill Inc. and Five Guys Holdings LLC, which are contributing to
McDonald's problems.
As McDonald's works to turn around its business, rival Burger
King is digesting a major acquisition: Canadian coffee-and-doughnut
chain Tim Hortons. The Burger King-Tim Hortons tie-up created a
giant now called Restaurant Brands International Inc. with more
than 18,000 restaurants in 100 countries, making it a fierce rival
to McDonald's roughly 35,000 global locations.
Brazilian private-equity firm 3G Capital, which bought Burger
King in 2010 and engineered the Tim Hortons deal, is known for its
strict cost-cutting and focus on profit-margin improvements. That
could lure investors from McDonald's and other struggling
stocks.
An analyst at Morgan Stanley recently said the Burger King and
Tim Hortons merger looks promising, while McDonald's continues to
lose market share in the U.S.
On top of changes to its menu, McDonald's is also trying to
enhance its credibility by marketing more on digital channels and
testing mobile ordering and payment. But given McDonald's negative
outlook for the end of last year, Janney Capital Markets analyst
Mark Kalinowski says 2015 will be likely as bad for the burger
giant.
Write to Annie Gasparro at annie.gasparro@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires