Chicago - The year-long revamping at McDonald's Corp.is paying off for the world's largest restaurant chain as its U.S. market share in the key hamburger segment in 1998 is expected to reach a high for the 1990's.
Charles Ebeling, a McDonald's spokesman, said Tuesday that the fast food chain's U.S. market share in the burger segment was expected to be “well over 40 percent” this year.
“It's a record in this decade,” Ebeling said.
According to Ron Paul, president of restaurant consulting firm Technomic Inc., McDonald's market share could be up to as much as 44 percent from around 42 percent last year.
The U.S. hamburger market is estimated to total $43 billion this year, Paul said.
“It's a creep, it's not a dramatic upsurge,” Paul said. “But the point is it's definitely up from where they've been, which is a pretty good performance.”
The improvement comes after a year in which the Oak Brook, Ill.-based company's top management was shaken up, it launched a drive to cut costs and reduced its corporate staff for the first time in its 43-year history.
In addition, McDonald's unveiled in March its “Made For You” kitchen system designed to serve hotter food faster and replace a 40-year old “batch” system.
Ebeling said nearly 2,000 of its roughly 12,000 restaurants in the United States had converted to the new system. All U.S. outlets are scheduled to have it by the end of 1999. Worldwide, the company has nearly 24,000 restaurants.
He said the increased market share was taken from across the burger segment, both from some large chains as well as some smaller, more regional ones.
Analysts said the increase was noteworthy because it came from operating improvements rather than from having more stores open.
“They've done it really by driving more sales per store,” said Mitchell Speiser, an analyst at Lehman Brothers. “That's the noteworthy part. They didn't just do it by growing units, it was done by real operations.”
Peter Oakes, who follows McDonald's at Merrill Lynch, said the interests of the company's management and its franchisees were aligned more closely this year than in the recent past, which has helped drive some of those operational improvements.
“McDonald's has had good success this year, there's no two ways about it,” Oakes said, adding that he expected the company to continue to grow its market share into 1999.
Technomic's Paul agreed, but said any improvement would depend on the success of McDonald's promotions next year, like its Beanie Baby promotion earlier this year and its current tie-in to the Disney animated move “A Bug's Life.”
“They've got a tough act to follow with the Beanie Baby,” Paul said. "And 'A Bug's Life' seems to be working.
“In this business you can't live off your laurels or your share does slip,” he said. “There are no sure guarantees.”
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