Habit-forming

McDonald’s needs Europeans to start eating its breakfast

January 27, 2014
January 27, 2014

Americans love their McDonald’s Egg McMuffins. Europeans, not so much.

The morning window, in which the fast-food giant sells egg sandwiches, hash browns and the like, only lasts until 10:30am, but still accounts for over a quarter of its US sales. Even in the Asia Pacific region, which McDonald’s views as a less mature breakfast market, the segment still contributes some 12% of the company’s revenues. But in Europe, breakfast accounts for only 5% of sales, and in France, the number is barely 1%.

McDonald’s hopes to woo the French from their croissants, the Greeks from their yogurt, and the Brits from their baked beans on toast. Their secret weapon? Coffee. McDonald’s believes it can boost the sale of its breakfast items by first convincing Europeans to buy its coffee.

“We know that coffee drives the visits at our breakfast time,” said CEO Donald Thompson in last week’s earning’s call.

Building new demand for the Egg McMuffin can be a challenge, but the tipping point for breakfast sales comes early, COO Tim Fenton told investors this past November. “The toughest part to grow breakfast is to get to 10%,” he said. “After 10%, it’s a little bit easier.” This logic may help explain the company’s success expanding its breakfast offerings (and sales) in Singapore, China and Australia. But it also underscores the uphill battle that lies ahead in Europe.

McDonald’s needs Europe to buy into its breakfast menu, because that’s where the company reaps its beefiest profits. “Breakfast represents the largest margins across the business,” CEO Don Thompson said in November. Considering how poorly much of the region has performed lately—its French and German segments, specifically—McDonald’s could really use the morning boost.

McDonald’s is likely encouraged by its success selling breakfast items to its British customers. McDonald’s breakfast segment grew by 10% in 2013, has doubled since 2008, and now represents 14% of its sales in the country. While some markets, like France, may simply not be within its grasp—in France, as the company acknowledged back in November, “there is no breakfast market”—McDonald’s has serious ambitions to boost its morning sales in other countries. Thompson has specifically mentioned Germany, Spain, Italy, Switzerland and the Netherlands as targets in the past.

A central part of that push will focus on coffee. “Given the size of the opportunity [in Europe], we’re placing strong emphasis on the development of the breakfast day part across the segment, leveraging our strong foundation in coffee,” said Doug Goare, president of McDonald’s Europe, in November.

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