McDonald's: No Longer the Great American Meal

His stores generated $80,000 in annual sales and he earned a profit of more than 15%. But thirty years later, in 2003, though Steinig's four restaurants had an average annual sales of $1.56 million, he was not at all happy. Sales had not increased since 1999 but costs kept rising. His profit margins were not more than half of what they used to be when he started off as a McDonald's franchisee. In December 2002, after McDonald's stock plummeted 60% over a period of three years, (Refer Exhibit I) the board sacked CEO, Jack M Greenberg (Greenberg) and replaced him by James R. Cantalupo (Cantalupo), who had earlier retired as the vice chairman of the company. In January 2003, McDonalds announced its first ever quarterly loss of $344 million, (Refer Exhibit II) since it went public in 1965.

Though McDonald's was still the leader in the fast-food market, with a marketshare of 42%, it was not just the same McDonald's that it used to be in the 1980s.

Analysts felt that McDonald's had lost its position at least in the US as an American icon. They attributed many reasons such as increased competition in the fast food industry, lack of innovation, and poor marketing to McDonald's poor performance.

An analyst commented: "They were the Great American Meal, and they have gone from being the Great American Meal to being the leader in fast food. From a brand perspective, that is a really big drop."¹