McDonald’s Product Introduction: Alcoholic

Beverages

Prepared by Saga Analytics: Jake Decicco, Nicholas Gatto, Ryun Holder, Michael Lederhouse

April 2015

Executive Summary

Mcdonald’s is struggling with decreasing sales and customer loyalty, introducing alcohol to the menu

is a method that could enhance customer experience and help the company overcome these

challenges. However, this introduction may pose a threat to McDonald’s brand image and the family

dining experience. The key to a successful introduction is to first undergo a test market while

implementing the customer-preferred pricing, placement, and product specifications. If implemented

correctly, with the customer in mind; this test-market introduction may lead to a national roll-out and

result in an improvement in McDonald’s sales and customer experience.

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Contents

❖ Background

❖ Research Objectives

❖ Design and Methodology

❖ Detailed Results and Conclusions:

Insights from Focus Group and

Survey

❖ Managerial Implications and

Recommendations

❖ Appendix

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Slide 4

Slides 5-9

Slides 10-13

Slides 14-27

Slides 28-32

Slides 33-51

Background Information

After experiencing its greatest decline in quarterly profits in the last seven years

(30%) and a decline in global sales growth of 3.3%, McDonald’s is at a

strategic crossroads. Something must be done to stop constantly falling

revenues and a lack of customer loyalty while simultaneously converting

potential customers who are opting to spend their dollars at popular, fast-casual

restaurants like Chipotle and Panera. Competitors in the QSR sector such as

Sonic and Burger King have begun to offer alcoholic beverages on their menus

in the hopes to solve similar problems with declining sales and customer

loyalty. This research explores and analyzes the idea of introducing alcoholic

products to McDonald’s menu.

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4

Research Objectives

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Management Decision Problem

● American consumers are increasingly demanding an actual dining experience and not just a

rapid, meal on the go. McDonald’s has not been effectively satisfying this demand and this has

led to major losses in sales, profits, customer loyalty, and brand reputation as customers flock to

fast casual offerings like Chipotle and Panera that provide these experiences.

● Core Management Decision Problem:

○ Determine how to create an attractive dining experience for the consumer

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Marketing Decision Problem

● The key marketing decision problem is: Should McDonald’s introduce alcoholic beverages to

their menus?

● In order to answer this main, marketing decision problem, we must also answer:

1. Should McDonald’s introduce alcohol to their menu?

2. If Mcdonald’s should introduce alcohol to their menu, what type and brands should they

offer?

3. What will we price this product at?

4. Where will we sell this product: Traditional McDonald’s Restaurants, McCafe’s, Specialized

McDonald’s Bars?

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Marketing Research Objectives

In reference to MDP #1

1.1: Explore the proposition of serving alcoholic beverages at McDonald’s restaurants in the USA.

1.2: Explore perceptions of alcoholic beverages on consumers’ dining experience

1.3: Explore the effect on McDonald’s brand image of selling alcohol

1.4: Evaluate changes in visiting behavior as the result of selling alcohol

In reference to MDP #2

2.1: Generate options of alcoholic beverages that McDonald’s consumers would purchase

2.2: Select menu of alcoholic beverages based on survey results

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Marketing Research Objectives

In reference to MDP #3

3.1: Measure consumers’ willingness to pay for specific alcoholic beverage

In reference to MDP #4

4.1: Explore customers’ preferences for alcoholic consumption in McDonald’s (locations, airports, bar,

seating, can vs. draught vs. bottle etc)

4.2: Select test locations for introduction of alcoholic menu

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Research Design and Methodology

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Method and Sampling: Focus Group

● Sampling

o We utilized a judgement sampling technique when choosing respondents for our focus

group. The focus group consisted of four males, ages nineteen to twenty-one. A

homogenous group of college-age males was chosen because McDonald’s has lost

millennials of this sort to competing quick-serve restaurants, like Chipotle.

● Focus Group Method

o Michael Lederhouse served as a moderator, following the discussion guide in Appendix 1

o The session was held in a quiet, casual setting with the goal of brainstorming current

millennial males’ perceptions regarding McDonalds and the proposition of adding alcoholic

beverages to the restaurant’s menu.

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Method and Sampling: Survey

● Sampling

o Convenience sampling was used to select family and friends for participating in the study

o 89 complete responses were used in analysis out of 115 surveys

o Respondents under the age of 21 were screened out of questions regarding alcohol

consumption but still responded to general questions regarding their perceptions and

evaluations of the McDonald’s dining experience

● Survey Method

o Online survey was chosen as the data collection method

● Tabulation

o Data from questionnaires was transferred into SPSS, with which data tabulation and

statistical analyses were processed

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Composition of the Survey Sample

● Demographic Characteristics of the Sample

o The majority of respondents were between the ages of 15-20

o Males comprised 69.57% of the sample

o Most respondents were from suburban areas

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Detailed Results and Conclusions:

Focus Group and Survey Insights

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McDonald’s is facing an overall negative perception of

its brand and offerings by the consumer

● By learning about the customer attitudes to the current McDonald’s offerings, one can begin to

understand necessary changes for the consumer:

● Focus group participants possessed an overall negative view of the McDonald’s brand and

offerings. When utilizing word association techniques with the McDonald’s name,

participants generally offered up negative statements like “greasy, fake, processed”.

Discussion proved that just being a fast and inexpensive offering is not enough,

McDonald’s needs to improve the quality of their food.

MRO 1.2, MDP 1

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Customers have a negative perception of the

McDonald’s Dining experience

● Focus group participants had an overall negative view of McDonald’s dining environment and

ambience, citing “cheap furniture and poor lighting”. Most were unaware of McDonald’s recently

revamped interiors. .

● Focus group participants prefer to do drive-thru, instead of dining in.

MRO 1.2, MDP 1

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The McDonald’s dining experience is dependent on the

location of the restaurant

● Focus group members from urban areas viewed the restaurant as an establishment filled with

homeless people and drunks, while focus group members from more suburban locations viewed

it as just a normal quick service restaurant.

MRO 1.2, MDP 1

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Alcoholic Beverages create a dining experience

● An alcoholic beverage transforms a dinner into a dining experience. Focus group participants

order a drink to relax, drinking an alcoholic beverage makes the meal “more of an experience”.

● Alcohol is a paired-product, certain beverages go with certain food items and actually enhance

each other.

MRO 1.2, 1.3, 1.4 and MDP 1

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Customers’ Willingness to Pay is dependent on many

factors

● Focus group participants’ willingness to pay for alcoholic beverages depends on the type of

beverage, quality of beverage, the restaurant, and the environment of the meal. Focus group

participants were much more willing to pay higher prices for a beer at a bar or upscale

restaurant, then compared to a QSR or fast casual restaurant.

MRO 3.1, MDP 3

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The average consumer is willing to pay $3.14 for a

drink at McDonald’s

● Respondents’ willingness to pay ranged from a minimum of $.99 to a maximum of $10

● On average, consumers are willing to pay $3.14 for a standard drink at McDonald’s, with a

median of $2.99

MRO 3.1

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Alcohol will alter the environment, dining experience,

and clientele of McDonald’s

● Some of the focus group participants viewed McDonald’s as a family restaurant and believed

that serving alcohol would contradict this image. At the same time, many participants said that

they would feel uncomfortable drinking in front of families, while some feared that offering

alcohol could attract a “transient” clientele.

● Focus group participants were attracted to McDonald’s offering alcohol but would not go out of

their way just to have it. Many would have to be passing by a McDonald’s and be hungry/thirsty

to actually go in.

● We explored this insight further in the survey and found consistent results (See next page)

MRO’s 1.1-1.4, MDP 1

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Many respondents believe that alcohol will negatively

impact the McDonald’s experience and image

● Surveyed respondents would be unlikely to purchase an alcoholic beverage at McDonald’s

because:

o Alcohol isn’t a good fit for McDonald’s food, atmosphere, environment

o It would be awkward, inappropriate in a family setting

o Consumption at McDonald’s would be have a negative social stigma

o See Appendix 3 for full list of responses

RO1.2, 1.3

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Respondents preferred Beer as McDonald’s alcoholic

beverage

● Beer was unanimously mentioned first as the go to beverage for McDonalds. The participants

had little issue reconciling beer with the McDonalds menu because, “burgers and beer go

together.” Beers are considered a casual alcoholic beverage which would be more socially

acceptable to drink at a place like McDonald’s than a cocktail or hard liquors.

● Cost of beer must follow McDonald’s “value menu” pricing style. Respondents suggested that

the quality of beer needs to be correlated to the quality of McDonald’s food. Suggestions of

beers like Pabst Blue Ribbon and Bud Light came from focus group participants.

MRO’s 2.1, 2.2, 4.1, MDP 2, 4

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Coors Light is the preferred beverage of respondents

Consumers are most likely to purchase Coors Light with 46.23% of respondents stating that they are

“likely” to purchase this beverage (See Appendix 4.2)

Mean rating (1-5) on likelihood of purchase:

Coors and Budweiser highest with a 3.278.

RO 2.2

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Setting is very important for alcohol consumption at

McDonald’s

● Focus group participants think that it is important to separate those consuming alcohol at

McDonald’s from those who are not. By creating an alcove, separate room, or patio, McDonald’s

would be able to preserve the family dining experience and create a unique experience for those

of age.

● Introduction alcoholic beverages on McDonald’s menu will create many regulatory issues, such

as ID enforcement.

MRO 4.1-4.2, MDP 4

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Consumers want their drinks served in a designated

area in a bottle

● 48.65% of respondents would prefer to consumer their alcoholic beverages at a bar in

McDonald’s

● 43.24% of respondents would prefer to drink their beverage out of a bottle Preferred Drinking Area Preferred Drinking Vessel

RO 4.1 26

Introducing alcohol to the menu has a unknown impact

on visiting behavior, but not overwhelmingly negative

● 56.52% of respondents are “undecided”

about a change in their visiting behavior

due to the addition of alcohol to

McDonald’s menu

RO 1.4

● Respondents who haven’t visited

McDonald’s in the past month are more

“undecided” regarding a change in their

visiting behavior due to the addition of

alcohol to McDonald’s menu (See

Appendix 4.1)

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Managerial Implications and

Recommendations

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Test Market

● Although data analysis from the survey indicates an undecided yet non-negative effect on

customer visitation with the introduction of alcohol, insights from the focus group reveal that this

product introduction may negatively affect McDonald’s brand image and the overall customer

experience. It is imperative that McDonald’s does not underestimate the effects of social

influence and criticism on this product introduction and as a result, it is recommended that

McDonald’s begins this roll-out in a test market. This test-market must be highly-contained but

also representative of McDonald’s customer base. Introducing alcoholic beverages to the

McDonald’s menu in a contained test-market will allow the company to further observe the effect

that this introduction has on the McDonald’s experience and brand image and aid in a decision

regarding a national roll-out.

● The following recommendations should be implemented in this test market (See following pages)

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Serve Coors Light in a bottle

● Data contains information to support the introduction of Coors Light as the primary alcoholic

beverage on McDonald’s menu

● We found that serving beer in a glass bottle was highest rated by respondents. Thus, it is

recommended to serve these beverages in bottles.

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Price the beer under $3

● Analysis found that the average consumer was willing to pay $3.14 for a bottle of beer, with a

median of $2.99. Thus, it is recommended that McDonald’s prices a bottle of Coors Light at

$2.99.

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Serve Alcoholic Beverages in a

designated, private area ● We found that customers would prefer to consume alcohol in a designated area, either at a bar

or table. As a result, it is recommended that McDonald’s creates a private area for drinking at

their test market location complete with a bar and tables. Current QSR competitors have created

outdoor patios and lounges for customers who are drinking alcohol and this designated area

would aid McDonald’s in separating the experience of of-age customers and families, while

facilitating the regulation and monitoring necessary to serve alcohol at a restaurant. In short,

data supports that this designated area would improve and preserve the dining experience of all

McDonald’s customers.

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Technical Appendix

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Technical Appendix Contents

1. McDonald’s Product Introduction-Alcoholic Beverages Survey: Slides 35-45

2. Word Map of “Why would you be unlikely to purchase an alcoholic beverage at McDonald’s?”: Slide 46

3. Full response list for “Why would you be unlikely to purchase an alcoholic beverage at McDonald’s?”:

Slides 47-48

4. Inferential Testing and Analysis: Slides 49-51

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Appendix 1: McDonald’s Product Introduction-

Alcoholic Beverages Survey

Q1 The purpose of the following questionnaire is to collect your general insights on McDonald’s and the potential introduction of

alcohol to McDonald’ s menu. Please answer openly and thoughtfully. On behalf of McDonald’s, we would like to thank you for

your time and truly appreciate your insights!

Q3 What type of area do you live in?

Rural (1)

Urban (2)

Suburban (3)

Other (4) ____________________

Q5 Have you been to McDonald's in the past month?

Yes (1)

No (2)

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Very

Dissatisfied

(1)

Dissatisfied

(2)

Somewhat

Dissatisfied

(3)

Neutral (4) Somewhat

Satisfied (5)

Satisfied (6) Very

Satisfied (7)

Food Quality

(1)

m m m m m m m

Price (2) m m m m m m m

Service (3) m m m m m m m

Dining

Experience

(4)

m m m m m m m

Restaurant

Atmosphere

(5)

m m m m m m m

Question 6: How satisfied were you on the following

elements during your last visit?

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Answer If Have you been to McDonald's in the past month? No Is Selected

Q7 Have you ever been to McDonald's?

Yes (1)

No (2)

If No Is Selected, Then Skip To “Do you ever drink alcohol at restaurants”

Appendix 1: McDonald’s Product Introduction-

Alcoholic Beverages Survey

37

Q8 How would you evaluate the following aspects of

McDonald's restaurants?

Very Poor (1) Poor (2) Fair (3) Good (4) Very Good (5)

Food Quality

(1)

Price (2)

Service (3)

Dining

Experience

(4)

Restaurant

Atmosphere

(5)

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Q9 How do you typically eat McDonald's?

Drive-thru (1)

Dine-in (2)

Take-out (3)

Q4 What age bracket do you fall into?

14 and under (1)

15-20 (2)

21-26 (3)

27-32 (4)

33-38 (5)

39-44 (6)

45 and over (7)

If 14 and under Is Selected, Then Skip To Thank you for your responses! We val...If 15-20 Is Selected, Then Skip to Final

Question

Appendix 1: McDonald’s Product Introduction-Alcoholic

Beverages Survey

39

Q10 Do you ever drink alcohol at restaurants?

m Yes (1)

m No (2)

Answer If Do you ever drink alcohol at restaurants?  Yes Is Selected

Q11 At what type of restaurants do you drink alcohol? (Select all that apply)

q Fast-Food (Burger King, Sonic etc) (1)

q Fast-Casual (Chipotle, Panera etc) (2)

q Bar/Pub (The Tomb's, Martin's Tavern etc) (3)

q Family Restaurants (Cracker Barrel, Applebee's etc) (4)

q Upscale Restaurants (Morton's, Daily Grill etc) (5)

Appendix 1: McDonald’s Product Introduction-Alcoholic

Beverages Survey

40

Q12 Which drink would you prefer to have with a McDonald's meal?

Water (1)

Soft Drinks (2)

Beer (3)

Wine (4)

None of the Above (5) ____________________

Q13 How would the introduction of alcohol to McDonald's menu change your likelihood of visiting?

Less Likely (1)

Undecided (2)

More Likely (3)

Appendix 1: McDonald’s Product Introduction-Alcoholic

Beverages Survey

41

Appendix 1: McDonald’s Product Introduction-

Alcoholic Beverages Survey

Q14 How likely would you be to purchase an alcoholic beverage at McDonald's?

Very Unlikely (1)

Unlikely (2)

Somewhat Unlikely (3)

Somewhat Likely (4)

Likely (5)

Very Likely (6)

If Unlikely Is Selected, Then Skip To Why would you be unlikely to purchase...If Very Unlikely Is Selected, Then Skip To

Why would you be unlikely to purchase..

Q15 How much would you be willing to pay for a beer at McDonald's?

______ In Dollars (1)

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Q16 How likely would you be to purchase the following

brands of beer at McDonald's?

Very

Unlikely (1)

Unlikely (2) Neutral (3) Likely (4) Very Likely

(5)

Miller (1)

Budweiser

(2)

Pabst Blue

Ribbon (3)

Coors (4)

Natural Light

(5)

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Appendix 1: McDonald’s Product Introduction-

Alcoholic Beverages Survey

Q17 Where do you think McDonald's should offer alcoholic beverages? (All that apply)

Bar (1)

Table (2)

Outside Patio (3)

Designated area (4)

I don't drink alcohol (5)

Q18 How would you prefer to drink an alcoholic beverage at McDonald's? (All that apply)

Can (1)

Bottle (2)

Plastic Cup (3)

Glass (4)

I don't drink alcohol (5)

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Appendix 1: McDonald’s Product Introduction-

Alcoholic Beverages Survey

Q19 Why would you be unlikely to purchase an alcoholic beverage at McDonald's?

Q2 What is your gender?

Male (1)

Female (2)

Q20 Thank you for your responses! We value your input!

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Appendix 2: Word Map of Q19

46

Appendix 3: Responses to Q19

because I don't drink

I don't want it when I eat that food and I feel it is a family place with children that should not sell alcohol

drive thru

I usually eat take out from MCD in my car. Adding alcohol not a wise idea.

I go to McDonald's because they sell hamburgers for very cheap, which I believe is McDonald's greatest strength. My typical meal costs $2.20

(2 quarter pounders). One alcoholic beverage would most likely cost more than double that amount.

I don't associate McDonald's as a fun place to hang out with friends and drink alcohol

It's not the place for it.

I don't spend money on alcohol very much.

Doesn't fit the type of meal id be eating

because i would never go to mcdonalds in the first place

If it is more expensive than the alternative option of purchasing beer. Or if it feels awkward among families.

I've always associated with beer in a sit down setting, where I can enjoy it slowly. I would feel rushed in a fast food chain.

Only if I didn't want to drink alcohol at that moment. Unrelated to whether it was at McDonald's or not

Do not stay long enough at fast food restaurant to enjoy a drink

Just doesn't really appeal to me

I would be likely to purchase; maybe I completed the survey incorrectly. Having alcoholic beverages there will not change my propensity to

visit/purchase at McDonald's

I usually eat at McDonalds as a quick, lunch option, where I generally don't want alcohol.

Because I have self-respect, so I don't go to McDonald's.

Type of atmosphere47

Appendix 3: Responses to Q19

Don't feel it is an appropriate venue

Has a negative social stigma, kind of awkward in front of families

Because I would feel weird drinking in an environment like that. WIth so many children.

Price

Unlikely to purchase alcoholic beverage because its unlikely I will visit a McDonald's

Because when I buy McDonalds, I normally am driving.

I would rather have an alcoholic beverage with a higher quality meal as opposed to a fast food chain burger

I don't drink

Drive thru is primary reason, no drinking and driving

I'm not going there to drink, just get a quick bite through the drive through

Doesn't mixdont go there very often

I am opposed to purchasing anything from MacDonald's because I do not want to support their business.

People drink outside of their house for the sociable atmosphere. The only people who go to mac d's for the

atmosphere are those who are too young to drink alcohol.

I visit for quick food and not a dining experience

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Appendix 4.1: Inferential Testing, Effect of Alcoholic

beverages on visiting behavior

This test was to determine whether or not there was a

significant difference in the distribution of responses.

H0: The responses are normally distributed across the three

levels

H1: The responses are not normally distributed across the

three levels

Results:

With a test statistic of

16.78 and a p-value of

0.000 there is evidence to

reject the null hypothesis

at the 5% significance

level.

This implies that there was

a significant difference in

the distribution of

responses.

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Appendix 4.2: Chi-Square Analysis, Beer Preferences

The purpose of this test was to determine whether or not the observed

differences in the distribution of responses of people “likely to purchase”

the different brands of beer. Initial analysis hinted that Coors was the

brand with the most positive responses; however, this test was to

determine whether or not there was a statistically significant distribution

in responses.H0: The responses are normally distributed across the four

brands

H1: The responses are not normally distributed across the four

brands

Results:

With a test statistic of

10.29 and a p-value of

0.016 there is evidence to

reject the null hypothesis at

the 5% level.

This reinforces prior

findings that Coors

received mostly positive

responses; the result of the

test implies that there were

differences in the

distribution of responses.

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Appendix 4.3: ANOVA Testing, Willingness to Pay

across Regions

ANOVA testing is used to determine whether or not the means of the dependent

variable are equal across the different levels of the test factor. In this case the

dependent variable was the “Willingness to pay in dollars” and the factor is the

“Location” of respondents.

H0: The means of the Willingness to pay are equal between different

Locations

H1: The means of Willingness to pay are not equal between Locations

Results:

With a p-factor of 0.089

there is no evidence to

reject the null hypothesis.

The means of the

Willingness to pay are

relatively equal across

locales.

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