Ronald McDonald Facing a Layoff

by Jeff Reeves | April 7, 2010 1:55 am

Ronald McDonald Facing a Layoff

Ronald McDonald debuted in 1963 with TV personality Willard Scott donning the clown costume for the first time in an ad spot for McDonald’s (MCD[1]). But if some health advocates have their way, the fiery-haired clown’s days are numbered.

The Corporate Accountability International is calling MCD mascot a “deep-fried Joe Camel for the 21st Century” and is sponsoring “Retire Ronald” events at several locations around the country. The group claims that Ronald McDonald is a spokesperson for childhood obesity, and they want him cut from the payroll pronto.

According to Corporate Accountability International, Ronald is feeding a “fast-food-industry childhood obesity crisis.” Nearly 60% of Americans polled by the group believe that the fast-food industry is responsible for a growing “epidemic of childhood obesity and diet-related disease,”and marketing efforts to children that include Ronald McDonald are the biggest culprits.

So what are the chances that Ronald really is facing a layoff? Actually, pretty good.

First off, it appears there is finally political will to push for healthier habits in youngsters. Childhood obesity has been adopted by First Lady Michelle Obama as her pet project, drawing increased attention to a health problem that is ballooning. Fast food is not entirely responsible for these changes, but there is not much argument that it is a significant cause. Since the First Lady has already won healthy concessions from top snack food and soft drink companies[2], it’s reasonable to think MCD may go along too.

Secondly, children’s meals aren’t exactly the bread and butter for McDonald’s so the corporate office of this $73 billion business may not put up a fight like big tobacco did when ad laws looked to squash marketing to young smokers. The company’s biggest bumps in the bottom line in the U.S. lately have come from the success of its Value Menu connecting with cost-conscious consumers[3] and the rollout of McCafe coffees to appeal to java junkies.

And on a broader note, like most big companies on Wall Street, MCD is an increasingly global business that is focusing overseas for profits[4]. McDonald’s beat expectations with a 2.6% jump in its same-store sales for January — however, a closer look shows that sales fell 0.7% in the U.S., and were offset by a brisk growth rate of 4.3% in Europe, Asia, the Middle East and Africa. In an already saturated U.S. marketplace, this overseas growth is the backbone for fast food companies. McDonald’s now operates over 500 stores in Brazil, 130 stores in Turkey and over 1,000 locations in the U.K. – and is showing no signs of slowing down as competitors like Taco Bell target rapid growth in India. [5]

There’s no denying that the introduction of Ronald was an advertising ploy directly for kids, coupled with the successful Happy Meal kids’ meals. If children lobby their parents to take them to a McDonald’s store, they effectively become mini marketing machine in households across the country. But a media-savvy public and a renewed focus on health may mean Ronald is doing more harm than good for the McDonald’s corporate image.

Then again, it may not be fair to turn Ronald McDonald into a villain just because American children don’t have healthy eating habits. Changing the Happy Meal mascot may not mean much if kids don’t have good role models and parents don’t encourage them to stop watching TV and get outside and get some exercise. McDonald’s would be well within its right to say that groups like Corporate Accountability International are overreacting.

The bottom line though is always the bottom line. MCD was one of the top Dow performers of the first quarter[6], so execs are sure to make success a top priority and not let Ronald’s ego get in the way. If MCD can spin a Ronald McDonald layoff into a great PR move that wins over consumers, you can bet the company will tell the 57-year-old clown to turn in his oversized shoes and yellow jumpsuit faster than you can say “fast food.”

Tell us what you think here.[7]

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Endnotes:
  1. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD
  2. healthy concessions from top snack food and soft drink companies: http://investorplace.com/experts/paul_ausick/articles/pepsi-pep-sodium-kraft-kft-coke-ko-campbells-cpb.html
  3. Value Menu connecting with cost-conscious consumers: http://investorplace.com/experts/jeff_reeves/dennys-value-menu-denn-stock-mcd-bkc-wen-yum-din-dri-rt.html
  4. MCD is an increasingly global business that is focusing overseas for profits: http://investorplace.com/experts/richard_band/articles/global-focus-paying-off-for-mcdonalds-coke-mcd-ko.html
  5. Taco Bell target rapid growth in India. : http://investorplace.com/experts/jeff_reeves/taco-bell-india-yum-mcd-bkc-wen-dpz.html
  6. MCD was one of the top Dow performers of the first quarter: http://investorplace.com/experts/jeff_reeves/dow-stocks-ba-ge-bac-dd-cat-msft-vz-pfe-t-aa.html
  7. Tell us what you think here.: mailto:editor@investorplace.com
  8. Red-Hot Data Proves Bull Market Here to Stay: http://investorplace.com/experts/jon_markman/articles/copyhoneywell-hon-ball-applied-materials-amat.html
  9. Dividend Stocks Add $6.4B in the First Quarter: http://investorplace.com/experts/jeff_reeves/dividend-stocks-qcom-wmt-utx-hon-kmb-ko-sbux-t-mo-mrk.html
  10. China and U.S. Race for Australia’s Coal (BTU, YZC, CEO): http://investorplace.com/experts/paul_ausick/articles/coal-stocks-china-peabody-btu-yanzhou-yzc-cnooc-ceo.html
  11. Get your FREE copy of this report here! : http://investorplace.com/order/?sid=OK3142

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