May, 1998

From the Editor

Burger War Lessons

Recently, The New York Times Magazine ran an intriguing piece entitled: “McBurgerKing: The Numbing of the American Palate.” It is an interesting piece for deli industry leaders to read because it says so much about the current state of American eating habits and about the enormous efforts that go into developing seemingly simple foods. Perhaps, most strongly, it illustrates the importance for any foodservice operator of having a strategy.

Presenters at the industry’s HMR conferences repeat “Restaurant Quality Food” like a mantra. This always seems to translate into upscale dining. Yet the search for restaurant quality food always seems to flounder. First, it is not clear what type of food to offer. Either a store offers the type of foods people are already eating at restaurants or it offers products that are not commonly eaten.

The battle between McDonalds and Burger King brings several salient points to the fore: First, growth in the fast food hamburger category has slowed to the point where McDonalds and Burger King are now focused on stealing each other’s customers. This is not dissimilar to general supermarketing.

Second, as competition heats up, the product line between these two vendors becomes more similar, not less. Paul Clayton, the North American President for Burger King is quoted as explaining how this process works: “People can only eat so many Whoppers. We said, ‘When the user wants something else, where does he go?’ We found that our customers were going for a change to get a Big Mac. We thought, ‘What if we did our own version of the Big Mac, so the heavy user wouldn’t have to go elsewhere?’” Thus was born the Big King, Burger King’s answer to the Big Mac.

Think about the thought process and research money that was involved in creating a Big King. For all the chatter about retailers being concerned about losing share-of-stomach to foodservice outlets, it is, by far, the exception and not the rule for retailers to do real research into what their own customers are eating when they are eating food bought at the store. It is even rarer still to see a supermarket use that research to actually develop food products or have manufacturers custom develop product.

Third, the heart of the article is that something like the Big Mac is not just a brand but a taste. Barry Schwartz, Burger King’s director of brand research is quoted explaining the dynamics: “Take orange juice as an example. If you do blind taste tests in New York, Tropicana will win every time. If you do it in California, Minute Maid wins every time. Because that’s the taste you grew up with. God knows how many Big Macs have been sold. If the palate has learned to like that taste – we’ll give it to them – only bigger and better.

Fourth, is that value for the consumer and profitability for the vendor are not mutually exclusive propositions. In 1992 McDonald’s introduced its first value meals. Normally, the gross profit on a sandwich is 70 percent; discounted, the profit margin was only 50 percent. But fries and soda have profit margins at 80 percent and higher. Janice Meyer, an analyst at Wall Street investment banking firm, Donaldson, Lufkin and Jenrette, is quoted as saying about value meals: “It was a brilliant strategy because it gave value to the customer by increasing sales of soda and fries.”

Fifth, know how your customer actually uses the product. Burger King introduced its new fries, with a potato starch coating to retain heat and make it hot and crispy on the exterior but soft inside. Burger King found that the key is not how the french fries taste in the restaurant but how they taste after going through the drive-thru and driving fifteen minutes to the office.

Too often we test under ideal conditions not mimicking the way real consumers experience our food.

Sixth, 50 percent of Burger King’s business is drive-thru and another 15 percent is takeout. How serious can we believe top supermarket management is about winning market share from foodservice if they don’t offer that drive-thru option?

Seventh, Burger King’s slogan is “It just tastes better.” DDB Needham Chicago is McDonald’s lead ad agency, and its chief creative officer Bob Scarpelli, comments on the marketing strategy: “The right thing for them is focusing on food, because they don’t have the depth of feeling that McDonald’s has. Food is a place where they have a perceived advantage. They finally figured it out. For us, it is more the total experience.” McDonald’s slogan is “Did somebody say McDonald’s?” and is designed to elicit a reaction from “the child within.”

The key point is that both chains are working on developing an identity and on capitalizing on that with consumers. Perhaps the real problem most supermarket delis face is that the delis are mostly nonentities, their identity amorphous, their positioning unclear.

Without that identity it is impossible to know what products to carry, how to price them or how to promote them. So the next time a retailer heads off to a trade show in search of HMR solutions, he should think that the answer to his HMR quandaries is likely to be found far closer to home than in the aisles of some far away trade show.  DB