Coffee with Ronald

Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Sitting down with Ronald McDonald at a McCafé® recently, we talked about what's on the horizon for McDonald's Corp. (NYSE: MCD) and others, as well as the good and not so good of recent performance.

Michael: I see McDonald's is being particularly aggressive concerning these McCafés.

Ronald: Yes, we launched them in 2009, and next to the U.S. market, our second biggest market is the coffee market in Canada.

Michael: I read a report dated November 11, 2011 at marketingmag.ca (Marketing, Advertising, Media and PR in Canada) that highlights that Douglas Fisher, President of the Toronto food service, franchise and hospitality consultancy FHG International, said the McCafé concept "… could draw customers to McDonald’s during the highly competitive breakfast sales period – which he said is currently owned by Tim Horton's." {Tim Hortons Inc. (NYSE: THI)}

Ronald: That's what we're continually shooting for each day. There's great potential for robust revenue streams from this ultra-competitive time of day for QSRs (Quick Service Restaurants). Although, I'm typically not up that early each day. Mrs. Ronald likes to lounge in bed with me, partaking of Egg McMuffins and our premium coffee while watching "LIVE with Kelly and Michael."

Michael: I see… um, well… I also see that the Company's undertaking a bold initiative for a QSR chain in Canada.

Ronald: I believe you're referring to our initiative of selling our take-home ground coffee (bagged coffee) exclusively in Canada through supermarkets.

Michael: I am; there's a quote from Kenric Tyghe, an analyst at Raymond James who covers Tim Hortons Inc. (Financial Post article (http://business.financialpost.com/2012/10/29) stating that Tim Hortons is "… up against a competitor that can afford to use coffee as a loss leader."

Ronald: We're not into losing.

Michael: I know that; but as a wily business strategy to gain market share in the important coffee arena…

Ronald: Do you like the new conditioner I'm using to give my hair that extra red sheen?

Michael: Okay…moving on…are you worried about those February numbers for the U.S. segment recently released by your company? The U.S. segment decreased 3.3%. This was lifeless excluding the segment's calendar shift of February 2012 including an extra day.

Ronald: With a get up like this that I have to wear each day to put Big Macs on the kitchen table for my family, that blip in sales is the least of my worries. Excluding the negative calendar shift, global comparable sales were up 1.7%. With the negative calendar shift, global comparable sales dropped 1.5%.

Michael: It's not exactly gangbusters for February.

Ronald: Want to arm wrestle?

Michael: No, thank you.

Ronald: We are a consistent dividend payer to our stockholders.

Michael: Yes, I see you have a higher dividend yield than Burger King Worldwide, Inc. (NYSE: BKW) and Jack in the Box Inc. (NASDAQ: JACK).

Ronald: You're right on; earlier this year our Board of Directors declared a $0.77 per share of common stock quarterly cash dividend.

Michael: Are there any immediate concerns you see?

Ronald: Yes, on one front we have the issue of the strike by fast food workers in New York, New York, which must be addressed.

Michael: I see they're looking for pay increases approaching $15 per hour.

Ronald: It's a significant issue on multiple fronts and does lead to bottom line concerns for our shareholders on the investing front. You should also note that we issued a statement that said that the Company values and respects all the employees who work at our restaurants.

Michael: Point taken and noted - anything else you want to report on the Company.

Ronald: This past November we received honors as one of the top 25 multinational workplaces by the Great Place to Work Institute. We were chosen because of our commitment and investment in providing on-going training and development for our global workforce of 1.8 million employees. The Great Place to Work Institute specializes in identifying and classifying the world's best workplaces.

Michael: Noteworthy, indeed. Have you kept abreast of the initiatives that other fast-food stalwart's are implementing for growth?

Ronald: Certainly, it's important to our shareholders' that we do. Burger King Worldwide, Inc. (NYSE: BKW) is being quite aggressive in the specialty coffee category now.

Michael: Yes, I see that; they've established a new coffee program as well as products that Seattle's Best Coffee will blend for them.

Ronald: Mr. Eric Hirschhorn, VP of Global Innovation for Burger King Worldwide, said recently that, "Continuing to innovate and improve the Burger King brand's coffee and beverage platforms are among our top priorities for the year.

Michael: Is that a concern to McDonald's? They're offering regular and decaffeinated Brewed Smooth Roast Coffee and Smooth Roast Iced Coffee and Lattes.

Ronald: We'll just have to be better. You sure you don't want to arm wrestle.

Michael: I'm sure. So, what are others doing to build market share.

Ronald: Well, I see for fiscal 2013 that Jack in the Box Inc. (NASDAQ: JACK) expects to open 20 to 25 new Jack in the Box restaurants. This includes approximately 10 company locations.

Michael: I see they're offering a new Bacon-Cheddar Stuffed Burger and their value-price Jr. Whopper.

Ronald: Hey, it's a very competitive marketplace. Companies have to be savvy and not be afraid to make the creative decisions to foster growth.

Michael: And the tough decisions as well. I see that burgerbusiness.com noted recently that, "A McDonald's franchisee says the chain will remove Angus Third Pounder burgers, Chicken Selects and apple-walnut salad, a move likely intended to clear menu space for an expected rollout of McWraps and other new items."

Ronald: You gotta do what you gotta do in business and in life. That's why I switched to that new hair conditioner I was talking about.

Michael: Right…okay. Thank you Ronald for your perceptive insight. And by the way, your hair looks simply marvelous.

Ronald: Ditto…take care.


Michael Ugulini has a position, long, in McDonald's Corp. (NYSE: MCD) . The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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