Mc Donalds Breakfast Menu PDF

Preview

Summary

wd dzb gdb vgd bg h...

Description

McDonald’s breakfast launch dilemma Farah Naz Baig

Farah Naz Baig is Lecturer in Marketing at the Institute of Business Administration, Karachi, Pakistan.

It was mid-July 2011, when Jamil Husain (Marketing Manager), Atif Abbass and Ali Raza (Marketing Executives) were sitting in the meeting room of Lakson Square Building, Karachi, in order to discuss the fate of McDonald’s breakfast menu. It was Jamil’s idea to launch the breakfast menu in the Pakistani market. He, however, was unable to convince his team members who thought that the market was not ready to accept the breakfast option since there was a huge difference between Pakistani lifestyle and Western lifestyle. Jamil presented his arguments before them but all in vain. Somehow he knew that the same arguments if presented in front of the top management would lead to a ‘‘No’’ situation. Just then the phone rang; it was Caroline, Company Secretary, confirming the meeting venue which was supposed to take place after two days.

Background McDonald’s, a company known for its hamburgers, was founded by two brothers Richard and Maurice McDonalds in San Bernardino, California in 1948 (www.en.wikipedia.org/wiki/ McDonald%27 (accessed July 4, 2011)) which was later bought by the franchise agent, Ray Kroc in 1955. McDonalds was present at more than 33,000 locations worldwide.

The author would like to thank Marketing Issues In Pakistan Class (Fall, 2011), especially Nadia Naeem, Aatira Mushtaq, Ayesha Waheed, Humayun Baber and Fizzah Shahid who helped me in this case. Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision making. The author may have disguised names; financial and other recognizable information to protect confidentiality.

DOI 10.1108/20450621211295587

In Pakistan, food was a source of entertainment. This could partly be attributed to the fact that there were not many entertainment options available and partly due to the Pakistanis’ love for good food. McDonald’s brought the branded ‘‘fast’’ food concept to Pakistan. The fast food concept was not very prevalent[1] in this South Asian market of 180 million people. However, the media proliferation, satellite TV exposure and the positive word of mouth (of people who had consumed McDonalds’ on their foreign tours) created the hype. No wonder one could see throngs of people gathering at McDonald’s when its first outlet opened in September 1998 in Lahore. The Karachi outlet opened a week after the Lahore’s opening. In 2011, there were 23 outlets operating in Pakistan (for details about the McDonald’s outlets, please refer to Exhibit 1).

Consumer behavior The eating habit of the Pakistani consumers varied due to numerous reasons. According to a research conducted by Gallup Pakistan’s research, 55 percent of Pakistanis ate meals three times a day. About 37 percent had two meals, 5 percent had one meal and 5 percent had meals more than thrice in a day[2]. When it came to breakfast, the products usually consumed were paratha[3], bread, tea[4], etc. (Table I). The breakfast products consumed varied with the socio-economic group (please see Exhibit 2 for the socio-economic classification (SEC)). Labor class living away from home

j

VOL. 2 NO. 8 2012, pp. 1-13, Q Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES

j PAGE 1

Table I Breakfast items

Paratha Bread Tea Rusk Roti with curry Nothing Others

2006 (%)

2008 (%)

2009 (%)

45 10 11 – 34 – –

41 11 13 – 33 – 1

49 10 9 7 18 2 –

Note: 30 years of polling on eating habits of Pakistanis 1980-2010, a Gallup Pakistan report Source: Gallup and Gillani, 30 years of polling data on eating habits of Pakistanis

relied on the road-side dhabas[5] for their meals. The regular breakfast menu of lower class laborers usually involved paratha and tea (please refer to Table II which summarizes the breakfast menu consumed on daily basis by various SEC; Tables III and IV for other food preferences). The breakfast menu for the traditional Pakistanis consisted of rich and oily foods preferably the halwa puri. It had two separate dishes, one of halwa (a sweet made from semolina) and the other aloo cholay (a spicy chick pea and potato curry) eaten with

Table II Class-wise breakfast consumption Breakfast items

Class-wise consumption

Tea Roti/bread/paratha Egg Cereal (cornflakes, porridge, etc.) Cheese Frozen food (Nuggets, croquets, patties)

All classesa All classes SEC A and B and (C not on regular basis) SEC A (B and C not on regular basis) SEC A (B and C not on regular basis) SEC A and B

Note: a Indicated by a U&A study conducted and according to Gallup’s 30 year of eating habits polling data: 90 percent consumers consume tea during breakfast

Table III Average meat consumption in a household per month Chicken (kg)

Beef (kg)

Mutton (kg)

4 4 4 7 3

4 3 4 9 3

3 3 3 6 7

All Pakistan Punjab Sindh Khyber Pakhtoonkhwa Baluchistan

Source: Gallup and Gilani, 30 years of polling data on eating habits of Pakistanis

Table IV Light and heavy meal preferences

Heavy lunch Heavy dinner Both meals heavy Both meals light No response

2003 (%)

2006 (%)

2008 (%)

25 16 32 26 1

19 23 34 24

18 19 18 44 1

Source: Gallup and Gilani, 30 years of polling data on eating habits of Pakistanis

j

j

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012

puri – a small round deep fried flat bread. The last course of the breakfast was usually chai[6]. This was usually accompanied by lassi[7] and depending on the drinkers taste, could be either salty or sweet. The sweet lassi option was often topped with malai[8]. This type of breakfast was usually consumed on weekends by all classes (upper-lower classes) (refer to Exhibit 3, Figure E1(a) and (b) for the weekend preference for breakfast). Per person cost for the entire menu (which consisted of puri, halwa and curry) ranged from Rs 20 to 40 depending on the location[9] (Exhibit 4). The type of breakfast consumed was impacted by: B

The increased number of females entering the workforce had led to the increased consumption of ready to cook meals, ready to eat meals and frozen foods in the urban areas. The working and the non-working female could be classified based on the income group and life style as shown in Figure 1.

B

Increased health consciousness due to media proliferation[10] and the increased number of gyms and health clubs in both posh and regular localities was an indication that health consciousness was rising.

B

The food preferences depended on geographical location also. People living in the Punjab province (Northern region) were famous for their excessive love for food. They were very forthcoming when it came to trying out new products. They usually preferred milder taste in food. People in Sindh province (Southern region) preferred spicy food.

B

In the urban areas there was an increasing trend of nuclear family system because of rural-urban migration, increasing utilities cost and media exposure (increased individualistic values among the young people as opposed to collectivistic values).

B

The business community and numerous other households specifically in the urban areas slept late at night and woke up late or in some cases just a few minutes before they had to leave for work.

On weekdays the working middle-class with kids preferred eating breakfast at home. The breakfast generally comprised of eggs, home-made roti (bread) and curry. In the dual income families there was a rising trend towards cereal, cheese and other ready to eat/ready to cook breakfast items. Breakfast was usually a rush time for these families as the kids got ready for school and mothers prepared lunch boxes for kids and husband. The morning hours from 7:00 a.m. to 8:30 a.m. were the peak traffic hours and one could see lots of hustle and bustle on the streets as the schools vans picked up kids, fathers drove kids to school (one could notice a typical middle-class family of three-four kids in school uniform driven by their father on a motor bike during these early morning rush hours) and office going people rushed to their work. Some of the SEC A class working men and women got their quick weekday breakfast solutions Figure 1

SEC A and B

Working

Not an active social life; prefers to stay at home after work.

Active social life; prefers eating out (frequency would vary with income class).

Non-Working

Not an active social life; prefers to stay at home. Prefers homemade food

j

Active social life; preferseating out (frequency would vary with income class).

j

VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

from outlets Dunkin’ Donuts or Espresso. The prime reason behind the choice of Dunkin’ Donuts was the availability of Dunkin’ Donuts outlets in the SEC A areas. Each upper class area had at least one Dunkin’ outlet. The breakfast solutions usually included products like sandwiches, wraps and rolls. A housewife belonging to the upper echelon of the Pakistani society either enjoyed breakfast at home prepared by her chef or had breakfast with friends at a fancy ´ after dropping her kids to school. These formal or informal eating outlets restaurant or cafe visited by the upper strata of the society initially offered only continental breakfast but some of these outlets had recently included the traditional breakfast menu as well. The housewives breakfast order ranged from high-calorie breakfast like shakes and waffles to low-calorie brown bread sandwiches depending on the health consciousness of these females.

Competition Acknowledging the trend of having traditional tea paratha or halwa puri for breakfast, the industry was dominated by the presence of local roadside dhabas and hotels that offered the serving. Not only was the serving cheap but it also satisfied ones hunger. Most of these dhabas were run by people of the nearby locality at a subsistence level. Bakeries were yet another key player in the industry. The variety in terms of baked food items that they offered along with hygiene and economical prices[11] made them a viable option for the consumer. These bakeries ranged from small corner stores to large spread out businesses, e.g. Gourmet Bakers in Punjab. The emergence of cafes and restaurants (both local and foreign) in the last decade had made the food industry very competitive. For some, offering the breakfast menu, worked as a differentiation point. For others it was simply capitalizing on the untapped potential to make some extra money. These restaurants and cafes’ not only brought the awareness among people about the continental food and but also developed the taste palette of the consumers. Few of the restaurants/cafes actually served breakfast on daily basis while others offered brunch on Sundays. Knowing that the market at present had a small following of people having breakfast outside, the restaurants and cafes charged premium prices to maximize profits (please refer to Exhibits 5 and 6 for the competitive offering details). These restaurants offered both traditional as well as Western cuisine to cater to a larger audience of food lovers. Some of the famous brands were. Ireland’s Butlers Chocolate Cafe ´ It was opened in Karachi on December 2009, on main Zamzama Boulevard (Posh locality of Karachi). It offered breakfast, mock tails, smoothies, shakes, waffles, truffles, ice cream, sorbets and chocolates. It had recently opened its outlet at the domestic and international terminal of Quaid-E-Azam International Airport. The price range for breakfast was Rs 300 and above. It offered valet parking for the ease of its customers. Espresso Espresso was launched in 2004. It operated in Karachi and Lahore. It offered a menu packed with mouth watering appetizers, a selection of sandwiches, wraps, pastas, paninis and divine desserts. A sizeable range of teas, smoothies, hot and cold beverages and an array of coffees all created from the finest imported and local ingredients were available at ´ . The breakfast menu ranged from omelets, burritos, pan cakes, croissants, kids the cafe breakfast with price starting from Rs 250 (with the exception of baked beans; please refer to Exhibit 6 for details). It also offered delivery services in certain areas of Karachi and Lahore; these included the upper-class residential areas and office localities. The delivery timings were from 8:00 a.m. to 2:00 a.m. on weekends and 8:00 a.m. to 1:00 a.m. on weekdays (www.espresso.com.pk/menu.html). It offered privilege cards as well. It had four outlets in Karachi and one in Lahore. Dunkin’ Donuts Dunkin’ Donuts started its operation in Pakistan in 2000. It had nine outlets in Karachi, five in Lahore, three in Islamabad and one in Peshawar. Its operations were controlled in Karachi by IFL and in Lahore and Islamabad by Phoenix Food (Pvt) Limited (www.espresso.com.pk/

j

j

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012

menu.html). It offered breakfast from 7:30 a.m. to 10:30 a.m. The minimum price in the breakfast menu was Rs 100. It offered various breakfast items such as sandwiches, pizza, croissants and coffee along with various combo deals. Others Other popular players in informal eating out category included cafe ´ 9, cafe ´ 76, Gloria Jeans, Coffee, Tea and Company (CTC) and Roasters. They had breakfast menu ranging from croissants, pizza, sandwiches and coffee (please refer to Exhibits 5 and 6 for details about price and breakfast offerings). These restaurants had an up market image. The other more formal eating out breakfast players included the four and five star hotels such as Sheraton, Avari and Marriott. The breakfast at these fancy restaurants started at Rs 900. Restaurants like Dominos and Pizza Hutt which were very popular in Pakistan did not offer any breakfast option.

McDonald’s customer profile McDonald’s catered to the urban population of Pakistan. Although McDonald’s penetration was mainly driven by the income group AB. SEC C was also amongst the target market. The top three segments of McDonald’s customer categorization: 1. the teens (15-25 years); 2. young adults (20-34 years); and 3. families with kids (FWKS) (30-49 years old, married with kids). McDonald’s developed its loyalty measurements based on the research conducted as shown in Figure 2. About 30 percent of the McDonald’s users were true loyals, 15 percent attitudinal loyals, 16 percent behavioral loyals and 39 percent competitive loyals (Source: interview with the marketing manger; base: all McDonalds users; please also refer to Exhibits 7-9 for the McDonald’s market in Pakistan). Jamil knew that there was not a great deal of investment required for this launch as the fryers and other equipment were in place. Only for some new items international suppliers had to be identified and once that work is done the raw materials[12] would be at the facility within a lead time of 45-50 days (please refer to Exhibits 10 and 11 for the proposed breakfast).

Figure 2 McDonald’s most often Behavior Loyal: People using McDonald’s most often but prefer another Quick Service Restaurant (QSR)

True Loyal: People using McDonald’s most often and whose favorite QSR restaurant is McDonald’s too.

Competitive Loyal: People using another QSR most often and prefer another one too.

Attitude Loyal: people using another QSR most often and whose favorite is McDonald’s. McDonald’s preferred

(Think Positive)

Source: Interview with the Marketing Manger

j

j

VOL. 2 NO. 8 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

McDonald’s in India McDonald’s launched its breakfast menu in 2009. The purpose of launching the menu was to capture the market which had no real branded option to compete with. According to an expert analysis 60 percent of the young Indians in Mumbai and other metropolis had at least one breakfast outside the house in a week – be it a roadside vendor, the office or the station. McDonald’s breakfast was aimed to serve as the next best substitute to idlis, dosas and vada pavs. Keeping the masses in mind, they proposed a menu that was not only affordable but had a traditional essence to it. The communication for the menu highlighted the importance of convenience and on-the-go breakfast option. The campaign was launched after six months of initial test marketing in key cities of India followed by a complete promotion drive throughout the country. Please refer to Table V for the items served on the breakfast menu along with their prices (in Indian rupees) (www.mcdonaldsindia.com/ breakfast-menu.html (accessed May 11, 2011)).

McDonald’s in Malaysia In contrast to both Pakistan and India, Malaysia was a metropolitan country. McDonalds realized the potential in the economy and decided to invest in the breakfast sector. The first mover advantage worked in their favor and they were able to seize a sizeable share in the market. They used a two pronged communication approach targeting both adults and families simultaneously. They offered on-the-go weekday meals for the working class whereas on the other hand served weekend breakfast baskets to FWKS especially aged between five to 15 years (Please refer to Tables VI and VII for the Malaysian weekday Table V Indian breakfast menu Price (Indian rupees)

Item Idli McMuffin Steamed vegetarian McMuffin Paneer and corn McMuffin Sausage McMuffin Sausage McMuffin with egg Steamed corn Crisp hash brown Hot cakes with maple syrup and butter ‘‘Big breakfast’’ platters

35 35 40 45 55 20 20 55 99

Source: www.mcdonaldsindia.com/breakfast-menu.html (accessed May 11, 2011)

Table VI Malaysian breakfast menu Week day menu deals

Price (RM)

Sausage McMuffin with egg þ coffee/tea 4.5 Sausage McMuffin þ coffee/tea 4.00 Egg McMuffin with chicken roll þ coffee/tea 4.5 Two pieces hotcakes þ coffee/tea 4.5 Chicken muffin þ coffee/tea 4.5 Source: www.mcdonalds.com.my/ourfood/menu_items.asp (accessed May 11, 2011)

j

j

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 8 2012

Table VII Malaysian weekend breakfast menu Weekend menu deals (family breakfast box) Big breakfast: English muffin (with scrambled eggs and sausage or grape jam), chicken sausages, hash browns, hot cakes, coffee One big breakfast with hash browns RM 24.90 One sausage McMuffin with egg/one egg McMuffin with chicken roll Two pieces hot cakes Two pieces hash browns Three coffee/tea (a) One big breakfast with one piece hash RM 19.90 browns (b) One sausage McMuffin with egg (c) Two pieces hot cakes (d) One piece hash brown (e) Two coffee/tea Source: www.mcdonalds.com.my/ourfood.asp (accessed May 11, 2011)

and weekend breakfast menu) (www.mcdonalds.com.my/ourfood/menu_items.asp (accessed May 11, 2011)). Recent times had seen the emergence of local cafes and international food chains giving stiff competition to its market dominance. The food giant, however, had maintained its share and was expected to grow by more than 20 percent at the end of 2011.

Moving forward

.

Notes 1. There were certain traditional on the go products like bun Kebab, kebab rolls available. 2. 30 years of polling on eating habits of Pakistanis 1980-2010, a Gallup Pakistan Report. 3. Traditional flat bread. 4. About 94 percent of the people consumed tea, while ...