Posted on: Thursday, June 12, 2003

McDonald's lovin' rise in sales, shares

By Bruce Horovitz
USA Today

Suddenly, McDonald's isn't the butt of so many cheesy jokes.

Company executives feel so confident that yesterday they announced plans for its first global ad campaign. The new theme: "I'm lovin' it."

The campaign will attempt to reinvent McDonald's as a place for the young and hip — and not just for the Happy Meal set.

McDonald's has reason to crow:

• Sales are up. In May, same-store sales in the United States were up 6.3 percent — the biggest increase in four years.

• Shares are on the rise. The stock closed at $21.64 yesterday. Although down slightly for the day, it's near a nine-month high and nearly double the nine-year low of $12.12 posted March 11.

• Analysts are on board. Banc of America raised its stock price target Tuesday to $26 from $21.

• Salads are a hit. The new entrée salad line has not only lifted sales at lunch and dinner, but also boosted the company's overall image and even improved breakfast sales, McDonald's executives say.

All of this comes under new CEO Jim Cantalupo — and just six months after the company posted its first-ever quarterly loss.

Now, after years of mostly mundane advertising, the company that built its image on the back of a clown who caters to 5-year-olds is about to seriously chase free-spending, freewheeling teens.

At the same time, it will try to lure boomers with a menu that doesn't repel them.

McDonald's executives won't reveal details.

But industry analysts says McDonald's ads will likely soon look and sound much more like Coke or Pepsi ads, complete with hot celebrities, pulsating music and MTV-like imagery.

"It will be fun, relevant, hip and compelling," says Charlie Bell, chief operating officer.

Even Ronald McDonald will be contemporized "so that the scripts, jokes and feeling will not just be about how to do kids' birthdays," says Larry Light, chief marketing officer, in a phone interview.

Oddly, the new, hip theme wasn't the brainchild of a U.S. ad agency.

After meeting with 550 marketing executives from 14 agencies in 10 countries, McDonald's settled on a global theme developed by its German agency, Heye & Partner, nestled in Unterhaching, a Munich suburb of 30,000.

Juergen Knauss, the unassuming, 65-year-old CEO of the German agency, says his plan is to make McDonald's "a lifestyle," not just a place to eat.

"McDonald's is finally doing the right things," says David Aaker, vice chairman at Prophet, a brand strategy specialist. "But their quality simultaneously went down with their marketing. They have a long, long way to go before they come back."

It won't be easy.

"Their image problem may be more psychological than physical," says Joseph Selame, branding director at Brand Equity International. No matter how the chain fixes food or restaurants, "There's a negative train of thought that goes through many people when they think about McDonald's."