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McDonald's struggles with identity and changing tastes

ABC News logo ABC News 6/08/2015 Jeremy Story Carter
McDonald's has suffered financial losses over the past six financial quarters. © Michael Sharman/Flickr McDonald's has suffered financial losses over the past six financial quarters.

The towering, luminescent yellow 'M' might once stood for monopoly.

For decades, McDonald's was untouchably dominant in global fast food.

Even as it was imitated by its competitors, it grew and grew. Now (though not for the first time) it's faltering.

In the US, home to 14,000 of the world's 36,000 McDonald's restaurants, sales slid 2 per cent in the last quarter, while the company's net profits fell 13 per cent.

Recently appointed CEO Steve Easterbrook, who labelled the quarterly results 'disappointing', said earlier this year that there is an 'urgent need to reset the business'.

Central to these reset plans is a range of healthier, more contemporary food options.

Vendeline von Bredow, a Chicago-based correspondent for The Economist, says that's problematic for a company with a 60-year legacy.

'I think it's really an identity crisis,' says von Bredow.

'McDonald's doesn't seem to have decided whether it wants to continue to be mainly a value restaurant where people go for convenient, fast but most importantly cheap food, or whether it wants to be something fancier.'

According to von Bredow, the perceived healthy offering of Mexican chain Chipotle in particular is eating away at McDonald's market share.

'That's very popular with millennials and teenagers in particular, because these kids have seen Supersize Me, the documentary about surviving only on McDonald's food, or Food Inc, a documentary about the corporatisation of the food industry.

'It's almost uncool to go to McDonald's, but it's cool to go to Chipotle.'

This isn't the first time McDonald's has faced dire problems in its American homeland. In 2003, the company was forced to confront plummeting sales and share prices.

'They had been over-expanding, so they slowed the pace of expansion,' says von Bredow.

'Their service wasn't very good anymore, some of the restaurants were even dirty, and they literally cleaned up their act at the time and focused their menu more on the all-time classics that people like.

'It recovered amazingly.'

Closer to home though, and Australia's McDonald's arm seems to be focusing less on classics.

In the company's current 'Create Your Taste' campaign, customers are encouraged to build their own 'bespoke' burgers, which analysts see as an attempt to cash in on the rise of 'foodie culture'.

Even the tagline for the campaign—'How very un-McDonald's'—seems like an attempt to distance the business from itself.

But Dr Rohan Miller, a senior marketing lecturer from the University of Sydney, says it merely represents another phase of innovation and reinvention.

'I think they've gone as far as they can with that business, so they have to explore new opportunities,' he says.

'What they are doing now is moving into a slightly higher market niche, and I think they are moving there driven by the need to expand their business.

'If anything it's got the potential of dragging the brand up.'

The success of the concept in Australia has now seen it rolled out in some sections of the US.

Whether it will be enough to return the golden arches to the splendour of their heyday remains to be seen.

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