McDonald's Gains at Burger King's Expense

NY Times ^ | 1/27/04

[Tumbleweed_Connection]

CHICAGO (AP) -- Is McDonald's going for Burger King's jugular? Executives of the world's largest restaurant chain laughed Tuesday when an analyst asked them that question about their struggling fast-food rival -- and didn't deny it.

McDonald's widened the gap on runner-up Burger King with a turnaround year in 2003 that saw it boost U.S. sales sharply through new products, extended hours, a high-powered ad campaign and the slowing of its rapid expansion pace.

The No. 2 burger-seller, meanwhile, has had lackluster results. Burger King's same-store U.S. sales, measuring performance at established restaurants, fell 4.4 percent in the second half of 2003 after overall sales declined nearly 2 percent to $11.1 billion in the fiscal year ended June 30.

``With respect to the major competitor, you know it's in our blood here,'' Charlie Bell, McDonald's president and chief operating officer, said on the conference call, without naming Burger King.

In a telling anecdote about the founder of the Oak Brook, Ill.-based chain, he added: ``Ray Kroc once said, 'If you see a competitor drowning, you stick a hose down their throat.'

``We do know the one that you're talking about is vulnerable. And we're going to work hard to make us continually successful, and they'll have to play catch-up,'' Bell said.

CEO Jim Cantalupo, who has been with the company for more than half its 49-year history, said McDonald's strategy is not about one competitor; rather, it's about ``all of them.'' But he acknowledged that market share -- where Burger King has remained a distant No. 2 -- is the driving focus.

``You've heard me say before, 'I don't like to talk about market share because we don't want to share anything,''' Cantalupo told the analysts.

A Burger King spokesman did not immediately return a phone call seeking comment.

McDonald's and Burger King have been going burger to burger for more than 30 years, with Wendy's and smaller companies also fighting for consumers' hearts and appetites. But the stakes of their battle have intensified recently as the U.S. fast-food market becomes increasingly saturated, casual-dining eateries take away business and Americans opt for healthier diets.

A price war between the two that stepped up in 2002 weakened profits and produced only mixed results, with Wendy's steering clear and picking up steady gains.

``Burger King's a good competitor, but McDonald's just needs to execute effectively and they are the dominant restaurant brand in the world,'' said Douglas Christopher, an analyst for Crowell Weedon in Los Angeles.

In the latest sign of turmoil amid continued sluggish sales, Miami-based Burger King fired its lead creative advertising agency last week -- its fifth marketing shake-up since 2000.

A year removed from its worst financial quarter ever, one that prompted a change in leadership, McDonald's reported a $125.7 million profit in the fourth quarter and pledged to remodel 1,500 to 1,800 of its 13,000-plus U.S. restaurants in order to improve operations further.

McDonald's shares rose 17 cents to close at $25.45 on the New York Stock Exchange. Burger King is privately owned.

[skinkinthegrass]

Hmmm...more, and more, The people @ the counter can't understand English...you have to repeat the order, twice.

[billorites]

I go to a Wendy's with my kids in Fitchburg, MA when we attend movie matinee's

Nice restaurant with good cheap food and decent service.

However, I find that I have to use my high school Spanish to make my order understood.

My high school Spanish ain't real muy bien.

[Who dat?]

``You've heard me say before, 'I don't like to talk about market share because we don't want to share anything,''' Cantalupo told the analysts.

Ha. That’s pretty good.

Meanwhile, I’m fond of Thai and Vietnamese food. The local joints can dish you up a lunch special for $3.00 that is delicious… never thought about McD’s or BK unless a local Asian joint isn’t available.

And, the young ladies that work there are friendly and personable and cute – though their English isn’t so great… they’re trying though, so I go back…

[Cicero]

I think Burger King made a big mistake coating its french fries with flour. They taste awful.

"Ray Kroc once said, 'If you see a competitor drowning, you stick a hose down their throat.' "

[MonroeDNA]

If BK had good fries, I'd be there.

BK's fries suck.

[lelio]

The WSJ had a good article the other day about BK changing their ad agency for the 4th time in 5 years. Donny Deutsch, famous ad exec, was quoted as saying something like he wouldn't even take their call. BK seems to think that their problem is in advertising when it isn't.

[Louisiana]

Neither are growing at my expense.

[yarddog]

I remember the first McDonald's I ever saw. It was in Ft. Walton Bch. and the hamburgers were 15 cents which was a good buy even in the early 60's.

What really made them a good buy was that they tasted good. I tried one maybe 10 years ago and that hamburger was sort of bland. Not really bad but not very good either. I remember Hardees back in the mid 60's had a large burger called the Husky which was great.

The last good fast food burger I have eaten was about 12 years ago when we stopped at a Burger King near the Mobile airport. Really fine but that was the last good one I have had at a burger place.

[lelio]

The only time I ever get a hamburger is at a "gourmet" (re: non-fast food place) like Red Robin or the local Red Mill Burger, famous for the no cell phone policy.

If you're going to kill your arteries, you minus well do it with something that tastes good.

[lawdude]

"However, I find that I have to use my high school Spanish to make my order understood."

Now I see your problem. It ain't "muy bien". It is "multi-bueno".

[azcap]

It seems to me that most of the BK advertising I have seen lately assumes that the customer lives in a ghetto. McDonald's went through the same phase a while ago. Wendy's is the the only big chain that I haven't seen insult their customers intelligence and I give credit to Jack in the box for having the savvy to make fun of themselves and still build brand.

[budanski]

I read somewhere that Burger King is actually owned by a European company. British?

[lelio]

I'll also throw in that a major BK franchiser in the Puget Sound area went belly up, closing 15 stores. Is that the same anywhere else in the country? Its odd that no one has stepped in to reopen the stores. Maybe being a BK franchisee isn't such a hot business.

[hoagy62]

In the past 6 months alone, I have seen at least 5 BK's close down here in the Seattle area. Before than, there had to have been around 10 BK's close here in the last 2 years.

With their recent ad campaign, I'm wondering if they plan to abandon the West coast to focus on the East.

[hoagy62]

Oops..I posted my reply a minute after yours...didn't know.

Sorry for the info repeat.

[Guillermo]

Me too, they're horrible.

Few burgers are better than a Whopper w/ cheese.

[John H K]

BK is definately better than McDonalds (McDonalds has the best fries if you get them fresh, though) what seems to kill BK is they can't market to kids for some reason. I don't think kids beg for BK the way they do for McDonald's.

[Fresh Wind]

Some years back, BK decided to save money by downgrading their buns from bread to something resembling paste. It's a wonder they're doing as well as they are. Yuck!!

[Verginius Rufus]

Cantalupo...interesting surname. Italian lupo = "wolf"; canta = "sings"

The cantaloupe was first grown in Europe at the castle of Cantalupo in Italy, hence its name. I suppose the family takes its name from the castle, not the melon.