What Will McDonald’s Do About Innovation?

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Last month, McDonald’s (NYSE:MCD) posted its first same-store sales decline in nine years. Company executives, who blamed the 2.2 percent drop on marketing missteps, the weak economy, and increasing competition from rivals like Burger King (NYSE:BKC) and Yum Brands’ (NYSE:YUM) Taco Bell, subsequently rearranged its management structure.

On November 15, the company announced that that current U.S. President Jan Fields would be replaced by the company’s Global Chief Restaurant Officer Jeff Stratton. Now analysts are betting that Stratton’s soon-to-be-unveiled marketing plan could restore Wall Street’s confidence in the burger chain.

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What is the Problem with McDonald’s?

Since McDonald’s sales peaked in February, when the company reporting that same-store sales had grown by 11.1 percent, monthly sales have been declining. Morningstar analyst R.J. Hottovy told the online publication Ad Age that “it’s possible that McDonald’s ran into sales problems because its innovation pipeline has been relatively small compared with previous years’.” Several years ago the chain expanded its menu with the addition of its McCafe line of coffee and espresso-based drinks.

“They have aging stores and a much-intensifying competitive set in terms of innovation, store design and…marketing,” an advertising executive told Ad Age. “Something is going to have to happen — either changes to the marketing management, to the current agency roster or investing in their stores or all of it. The status quo is not going to work.”

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