Burger Wars III: Escalation

When I was younger a “guilty pleasure” was going to McDonald’s and eating five or six cheeseburgers at a sitting – or, if you like, one and a half of the “Double Big Mac” products you sometimes see on the Value Menu nowadays. I’ve never been a particular fan of the company, and the regular cheeseburger isn’t even my favorite product on their menu – it hasn’t been more than a light snack for me since 1975 or so, or at least a single one hasn’t been. But there’s something wonderfully decadent about just eating as much of something as you want to, especially if it’s something that was originally supposed to be an entree. And with cheeseburgers and double cheeseburgers now some of the cheapest products in fast food, thanks to the infamous Value Menu, this custom seems to have become widely popular – to the point where it is interfering with healthier fare…

According to an article from the Associated Press by way of the ABC News site, McDonald’s has announced that it is dropping several of its high-end products from the current menu, including the line of Angus burgers, the line of Chicken Select sandwiches, and something called the Fruit & Walnut salad. Although the company hasn’t explicitly said why they are taking this step, the industry expects cited in the article note that sales of the Angus line and other top-end products have been soft for some time, in large part due to the availability of cheaper products off the Value Menu program. By itself this probably isn’t terribly significant – McDonald’s has been experimenting with various new products since the 1960s, and has rotated things in and out of their menu as purchasing trends developed, just like any other food service company. What makes is event interesting from a strategic point of view is that the trend does not appear to be limited to McDonald’s…

I had written in this space a couple of years ago about the deteriorating relationship between many of the Burger King franchise holders and the parent company over control issues such as selection of advertising campaigns and menu selection. One of the key areas of contention, in fact, was Burger King Corporate demanding that all of the franchisees offer a value menu that was cheaper than the competition (primarily McDonalds) at prices too low to include any profit. This was great for the company – it allowed them to claim (correctly) that their outlets offered more product for less money than the competition – but problematic for the franchisees, who were having to bear all of the attendant costs. If this campaign had merely been a loss-leader strategy – using the unprofitably low prices to increase customer traffic and develop sales for other products – it might have worked, and the franchise holders might have accepted it. But with the rise of customers eating nothing but low-margin Value Menu products this idea no longer made any sense…

It’s still too early to say if there will be any long-term fallout from these maneuvers. Fast-food and quick-service customers are still changing their buying patterns, and there is no way to tell if healthier or cheaper product offerings will gain the lead, let alone hold onto one. But as any undergraduate business student can tell you, price wars rarely end well for any of the combatants, and sometimes they end badly for the customers as well. If all of the major fast-food chains end up offering nothing but low-cost products (a dollar or so) and “healthy” products like the “Snack Wraps” it is possible that they will end up fighting over a smaller and smaller set of customers, while the people who like sandwiches that actually taste like hamburgers (or real food in general) gravitate to other parts of the industry or out of the quick-serve sector altogether…