Part of what has hurt McDonald’s in its quest to win over millennials — the much coveted demographic group that seems at best ambivalent about the Golden Arches — is so simple an 8-year-old girl could understand it.
Luckily, I have an 8-year-old daughter, because I never would have seen it otherwise.
And that one unexpected reason the generation born between the early 1980s and early 2000s has no great love of McDonald’s is … Happy Meals.
Huh, you say? That can’t be true. Everyone knows Happy Meals make kids love McDonald’s, enabling the brand to stake its claim to a corner of their still-developing brains. Critics have long said the toy-food combos are the start of a lifelong relationship with fast-food, not the catalyst for spurning Big Macs and fries.
But what if, when millennials were being raised on Happy Meals, they were in fact being conditioned not to love McDonald’s, not to love cheeseburgers, not to love McNuggets and fries but, rather, to love the toys that were intended as a come-on? Might that be a factor in the recent slump at McDonald’s, its worst in more than a decade?
What we know is customers in their 20s and 30s historically have been a sweet spot for Oak Brook-based McDonald’s, but its stores have been losing millennial customers the last few years to so-called fast-casual chains such as Chipotle Mexican Grill and Five Guys burgers that offer pricier, marginally fancier fare.
“The millennial has been very difficult to influence,” said Darren Tristano, executive vice president of Technomic, a Chicago-based restaurant consultancy. “Millennials are less loyal. … They don’t feel they have to go to that place their parents took them to, and they certainly don’t want to go to that place their parents eat at. They want what’s new and what’s next.”
This post-Gen X demographic, sometimes called Gen Y, has shown an attitude that says: “I’m willing to pay more, whether it’s my money or not, but I want better,” Tristano said. “It’s unfortunate, but McDonald’s can’t do better and still be high-value and affordable. That’s their big problem. Even when they’ve come out with better products at higher price points, consumers didn’t go for them.”
Data that Technomic compiled last month for The Wall Street Journal showed the percentage of people between ages 19 and 21 who visited McDonald’s monthly in this country had declined 12.9 points between the start of 2011 and this summer.
The percentage of those between 22 and 37 coming into McDonald’s monthly was flat over the same span, while fast-casual restaurants enjoyed a surge of 2.3 percentage points when it came to 19- to 21-year-olds upping their monthly visits and a bump of 5.2 percentage points for the older group.
So, even though the company was able to announce a dividend increase Tuesday for the 39th successive year, McDonald’s has a problem.
It’s not an insurmountable problem in that the company had $35.8 billion in systemwide U.S. sales in 2013, according to QSRMagazine.com. Sales could slide an awfully long way over an awfully long time before anyone overtakes it. The next closest chain was Subway, with $12.7 billion in 2013.
In fact, you can combine the 2013 U.S. sales of Wendy’s, Burger King, Taco Bell, Chick-Fil-A, KFC and Five Guys, and McDonald’s still comes out almost $200 million ahead.
Which bring us to lunchtime with the girl, 8. We had an hour between gymnastics classes. We were a block from McDonald’s.
“I only want to go there if they have a prize I want,” she said.
They didn’t.
Later, over quesadillas at Chipotle, she suggested McDonald’s could win her affection with a full-size American Girl doll in its Happy Meals. “But,” she said, thinking about it for a moment, “that Happy Meal would probably cost $100.”
If an 8-year-old feels that way about Happy Meals and Mighty Meals, what about the grown-ups taking them out to eat? And what happens when those 8-year-olds become 18?
“More choices, sophistication and better quality are driving kids’ attitudes away from McDonald’s and toward these other restaurants,” Tristano said. “When kids get into that 8-to-12 range, before they become tweens even, they not only want something different, they want something better. What’s changed is the fast-casual industry — like Chipotle and Panera — all these offering other choices and higher quality.”
McDonald’s has said it understands that millennials, like all of its customers, “share a desire for fresh, quality ingredients,” and it’s looking to expand its offerings to meet that demand. It’s also trying to tap into digital marketing and mobile ordering platforms.
But the lesson about the Happy Meal is it has to be about the food, not the geegaws and gimmicks. As the Beatles, absent parents and spurned self-financed politicians all will tell you, real loyalty is earned not bought.
“Trying to change who you are, which we all know as individuals, is very difficult,” Tristano said. “This is a big train that needs to slow down and stop before it changes direction. … The next generation may be the one that they’re going to get to return to McDonald’s, and that could start with the kids’ meals.”
Keeping eyes on the prize for McDonald’s means keeping the focus on the food.
Twitter @phil_rosenthal
