The WSJ has an informative video on McDonalds approach to localisation versus globalisation. For any executive grappling with the ‘do I or don’t I,’ question regarding changing formulas, packaging, names, claims and recipes for new markets it’s well worth watching.
Although McDonalds is an American company, and I believe seen as ‘American’ by most consumers, actually international accounts for a greater share of revenue. There are also more international than US stores.
McDonalds growth internationally relies upon franchise or licence partners; keeping them happy is critical. Whilst not vocal front of house, their voice is loud.
McFlurry was invented in Canada and has since become a set piece on the International menu. There are many other examples. In Japan where I live, McDonalds makes a big play on its Samurai burgers. (Incidentally an item that goes down a whopper (couldn’t resist it!) or two in places like Singapore.)
According to the video, McDonalds new CEO is champing at localisation. He sees more SKUs, more ingredients, longer preparation time, less synergy and higher cost. It is not an unusual CEO refrain.
When should you localise? It’s a question we often explore with clients. There’s of course no one right or wrong answer.
Three reasons to localise
1. Strong competitive threat
For example McDonalds was challenged by KFC and the appeal of chicken in several markets
2. Regulatory issues
Certain ingredients or claims aren’t allowed
3. Significant taste differences
This is the most compelling! Trial & repeat are the building blocks of a sustainable consumer products business. Trial is hard, and expensive; building repeat cannot be taken for granted. Consumers can be fickle and love to explore. You often only make ROI after several repeat purchases. The product must deliver, noticeably. In food and beverage, consumer taste preferences do vary enormously globally. Sweetness, texture, aftertaste and more.
Why not localise?
Beside complexity & supply chain issues…when changing the formula undermines the brand’s provenance or DNA. Champagne from the champagne region, Thai curry from Thailand…
For many MNCs, localisation is often a necessity. I’m sure McDonalds doesn’t source all ingredients from the US, it uses local suppliers. Even with strict product specifications some ingredients are different. Generally speaking grass fed cows produce creamier and more flavoursome milk. That’s one example.
What the video doesn’t mention is there are also different ordering and merchandising systems in McDonalds globally.
I won’t admit to being a regular McDonalds customer, but I do occasionally relent. In Japan where I live it’s very rare to order using a touch screen. I’m writing this post in Scotland and here all the ordering systems are touch screen. Polish is even offered as one of the language options!
