McDonald's Global Sales Advantages
2008 Revenues for World’s Top Fast-Food Company are $23.5 Billion
Feb 11, 2009
Much has been written about the trade advantages that developing countries with low labor costs have over the United States of America, particularly in the industrial and manufacturing sectors.
Less well known are competitive advantages in the lucrative and blossoming global fast-food industry that McDonald’s has over emerging economies such as China, India, Brazil and Mexico.
The following analysis shows why McDonald’s corporation is the world’s leading force in the international fast-food sales.
Number of McDonald’s Restaurants Worldwide
According to its latest filings with the Securities Exchange Commission, McDonald’s employs over 1.4 million restaurant employees in more than 31,000 restaurants throughout 118 countries.
At the end of 2008, more than 40% of McDonald’s stores were in the United States. About 26% belong to the geographic sector known as APMEA (Asia Pacific, Middle East and Africa) with 21% located in Europe.
The following list shows countries with the most McDonald’s restaurants in 2008.
- United States … 13,918 restaurants (43.5% of global total down from 44.2% in 2007)
- Japan … 3,755 restaurants (11.7% down from 11.9%)
- Canada … 1,414 restaurants (4.4% down from 4.5%)
- Germany … 1,333 restaurants (4.2% up from 4.1%)
- United Kingdom … 1,190 restaurants (3.7% down from 3.8%)
- France … 1,133 restaurants (3.5% same as prior year)
- China … 1,012 restaurants (3.2% up from 2.8%)
- Australia … 782 restaurants (2.4% same as prior year)
- Brazil … 562 restaurants (1.8% same as prior year)
- Spain … 393 restaurants (1.2% same as prior year)
- Italy … 379 restaurants (1.2% same as prior year)
- Mexico … 379 restaurants (1.2% same as prior year)
- Taiwan … 349 restaurants (1.1% same as prior year).
China opened 136 new McDonald’s outlets in 2008, the most for any country.
McDonald’s 2008 Revenues by Geographic Segment
Of the US$23.5 billion in overall revenues last year, European McDonald’s operations generated the largest percentage amount. Stores in Asia Pacific, the Middle East and Africa achieved the highest sales percentage gains over 2007.
- Europe … US$9.9 billion (42.2%) up 11.2%from $8.9 billion
- United States … $8.1 billion (34.3% of global total) up 2.2% from $7.9 billion
- APMEA … $4.2 billion (18%) up 17.6% from $3.6 billion
- Canada, Latin America and other … $1.3 billion (5.5%) down 45% from $2.4 billion.
European revenue increases were led by strong sales in Russia, France and the UK. The large sales decrease in Latin America and the Caribbean resulted from the August 2007 sale known as the Latam transaction. Existing businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries were sold to a developmental licensee.
McDonald’s 2008 Operating Income by Geographic Segment
McDonald’s earned operating income of $6.4 billion last year, propelled mostly by American and European stores.
- United States … US$3.1 billion (47.5% of global total) up 7.7% from $2.8 billion
- Europe … $2.6 billion (40.5%) up 22.7% from $2.1 billion
- APMEA … $818.8 million (12.7%) up 32.9% from $616.3 million
- Canada, Latin America and other … -$43.6 million (-0.7%) a 97% improvement from -$1.7 billion.
Operating income from geographies like Asia Pacific, the Middle East and Africa represent a smaller percentage of the US company’s earnings. However, earnings from those regions grew at much faster rate particularly in emerging economies.
Big Mac Adapts to Global Recession
For January 2009, McDonald’s reported that same store sales continued to rise by 7.1% globally. That figure would have been even higher at 9.1% if not for the strengthening American dollar.
While not recession-immune, McDonald’s sales and earnings continue to rise as consumers demand fast and inexpensive food in easily accessible locations.
McDonald’s wages for its front-line workers are low, especially when compared with industrial and manufacturing employees. So the chance of a fast-food chain from China or India setting up lower cost and more profitable operations in America than McDonald’s simply isn’t feasible.
Unlike other American companies like Starbucks that often tries to enforce a US-style menu on local consumer tastes, McDonald’s has been nimble at adapting its offerings to foreign market demand. For example, the company’s Sichuan spicy menu item known as the China Mac became a smash hit at the recent Beijing Olympics.
A much more likely scenario is that the global recession will enable the Golden Arches to build on its competitive advantages in selling fast foods in developing economies around the world.
Sources for this Article
This article presents independent calculations and insights based on McDonald’s Corporation 8-K Securities Exchange Commission filings dated January 26, 2009 and February 10, 2009.
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