Monday, October 27, 2014

McDonald’s showing a 3.3 per cent drop in customer traffic worldwide

English: McDonalds' sign in Harlem.
English: McDonalds' sign in Harlem. (Photo credit: Wikipedia)
The Coca-Cola logo is an example of a widely-r...
The Coca-Cola logo is an example of a widely-recognized trademark representing a global brand. (Photo credit: Wikipedia)
Some of the biggest companies serving consumers are showing signs of stress this week, with McDonald’s showing a 3.3 per cent drop in customer traffic worldwide and worldwide sales by Coca-Cola flat.

A more discriminating and health-conscious consumer is eating into profits at both companies, and the strategies they’ve taken to change their product offerings have not caught on as hoped.

In the case of McDonald’s, a significant misstep in China also hurt its prospects throughout Asia

Sales there are down 9.9 per cent after a McDonald’s supplier based in China was shown on TV repackaging expired beef.

Reputation hurt in China

McDonald’s previously had a reputation for quality control, consistency and safe food in China, a country that has an uneven record on food safety. It seemed modern and Western in a place where 25 years ago dining rooms were concrete bunkers where customers commonly rinsed their dishes with tea to sanitize them before being served.

McDonald’s apologized and stopped buying from the offending factory, which resulted in shortages of beef and chicken throughout its Asian operations. Its reputation is still suffering.

Revenue declined to $6.99 billion US, short of the $7.23 billion Wall Street expected. Net income declined to $1.07 billion, or $1.09 per share, also missing expectations.

In North America, McDonald’s, like Coca-Cola, is fighting to hold on to customers amid shifting tastes in food and heightened health-consciousness.

To defend the image of its food, McDonald's launched a social media campaign last week in the U.S. inviting customers to ask questions about the ingredients it uses. Among the first questions McDonald's was forced to address were "Why doesn't your food rot?" and "Do you use real chicken in your Chicken McNuggets?"
Customers are shunning burgers, but new McDonald's menu items have not caught on in the same way. The chain, with 14,000 U.S. restaurants, is losing out to rivals such as Chipotle, which emphasizes the freshness of its ingredients.
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