Economy, Rivals No Match for BK's Marketing
Emily Bryson York
May 5, 2008
-- Burger King is giving rivals a solid thrashing -- and
marketing is getting the credit.
While other fast feeders fault the recession and housing crisis for tepid sales, Burger King posted a healthy same-store-sales gain of 5.4% in its fiscal third quarter, well ahead of even McDonald's, which reported a comparatively anemic 2.9%.
'Freakout': BK says prank drove sales.
No. 3 burger chain Wendy's, now in the throes of an ownership change, saw same-store sales fall 1.6% at company-run stores in the same period.
Analysts are crediting Burger King's marketing with some of the gains.
"They're doing a super job on the advertising front," said UBS analyst David Palmer. "They're clearly connecting with the super fan that is the young, hungry male."
Burger King CEO John Chidsey said, "The current macroeconomic environment did not impact our top-line performance as consumers continued to seek our quality, convenience and affordability."
'Barbell menu strategy'
He credited the wildly popular "Whopper Freakout" campaign from Crispin Porter & Bogusky with driving sales through January and kid-friendly promotions involving SpongeBob SquarePants and Snoopy, from Campbell Mithun, with bringing families into the restaurants during the quarter. He added that the chain's "barbell menu strategy," with value-menu offerings such as the Whopper Jr. and the crispy-chicken sandwich at one end and premium fare such as the new BBQ Bacon Tendercrisp on the other, is also faring well.
It hasn't been an overnight turnaround for the King; this is its fourth consecutive year of positive same-store-sales growth. But until recently, it was McDonald's that was the industry's biggest engine of growth. The chain began a storied turnaround in 2003, and while its same-store sales are still on the upswing, the trajectory is slowing. McDonald's recently put the blame on the economy.
But even as gas prices climb and the economy gets more wobbly, UBS's Mr. Palmer expects Burger King to grow even stronger through the summer. It's got more new products in the pipeline, some blockbuster summer movie promotions lined up and is just starting a "reimaging campaign" to update the look and feel of its stores, some of which are 30 years old.
Mr. Palmer said the chain is benefiting from tactics that have boosted McDonald's bottom line in recent years, including longer hours and a wider breakfast value menu. Burger King has average sales of $1.5 million per store, compared with $2.2 million at McDonald's, so he said there's room for even more growth in the future. With lower sales at similarly sized stores, Mr. Palmer said, it's easier for Burger King to boost same-store sales by an extra $100,000 per store. McDonald's, on the other hand, may have to wait until its beverage initiative has launched nationwide to see sales bumps of a similar magnitude.
Also on Burger King's side are alliances with some of the more hotly anticipated summer films: "Iron Man," "Incredible Hulk" and "Indiana Jones and the Kingdom of the Crystal Skull." For the last, Burger King is planning an Indiana Jones-themed sandwich: an Indy Double Whopper (two patties, pepper jack, bacon and Cajun mayo).
Upcoming are new-product plans aimed at kids. Burger King signed on to the Better Business Bureau's Children's Food and Beverage Advertising Initiative late last year and will roll out "apple fries" in its locations nationwide this summer. The fresh-fruit offering is simply apples cut to look like fries, employing a proprietary technology that prevents them from turning brown. Burger King will also be adding a child-pleasing Kraft Macaroni & Cheese dish to the menu.
"Actually the majority of [the apple fries side] is going out à la carte and being consumed by adults as well," Burger King Chief Marketing Officer Russ Klein said on a conference call.