LONDON (AdAge.com) -- McDonald's in the U.K. has just had its best ever year and despite -- or perhaps because of -- the economic climate, its chief marketing officer for U.K. and Northern Europe, Jill McDonald, is in a bullish mood: She's expecting to come out of the recession serving more customers than going in.
The fast-food giant won't divulge exact marketing budgets, but Ms. McDonald is in charge of a growing media budget that already exceeds $45 million in the U.K. alone, and that excludes spending on production, merchandising, promotions and agency fees.
Ms. McDonald joined McDonald's three years ago after 16 years at British Airways, most recently as general manager for global marketing and in-flight business. She has been at the center of the U.K. company's dramatic turnaround, achieved by a more confident, open dialogue with consumers, more-healthful food options and heavy investment in new-look restaurants.
In an interview with Ad Age, she discusses how McDonald's is faring amid the credit crunch, and why she works so closely with others in the C-suite.
Ad Age: How is McDonald's doing in U.K. and Northern Europe?
Ms. McDonald: We are up 8.5% in Europe. In the U.K., 2008 was by far the strongest year McDonald's has ever had, and that's on the back of comparable sales, not opening restaurants wildly. In terms of penetration, 70% of the population and 80% of families visit us. Frequency is growing ahead of penetration -- we had 2 million more customer visits a month last year than the previous year. We serve two million customers a day.
Three years ago [when I joined], we really took a step back and looked at what we needed to do, because 2005 hadn't been a good year for the business or for the brand.
We fixed the basics in restaurants in terms of processes and we franchised more -- when people own a restaurant they tend to run it particularly well -- and the banks are still happy to lend our franchisees money.
Once the basics were in place, we invested in things like the new look and feel of the restaurants and improved the nutritional content of the food, reducing salt, fat and sugar and only using white chicken breast, free-range eggs and organic milk.
Since we introduced Rainforest Alliance coffee beans, we are selling 10 million more cups of coffee than we were a year ago, up 20%.
Ad Age: Tell me about the restaurant "McMakeover."
Ms. McDonald: It's all about ensuring that McDonald's is seen as a modern, relevant, progressive burger company.
There's a lot less red and plastic, and lots more greens and purples coming in, as well more natural materials, more use of wood. We don't want to go for a cookie-cutter approach; we want variety.
Ad Age: How do you feel about advertising to children?
Ms. McDonald: I'm a mother of two young boys, 7 and 6, and they have always enjoyed McDonald's, so I've always been connected with the brand.
We do a lot of talking to parents about what they feel is appropriate because there's no point appearing on a television set in a front room if it is really going to irritate parents. Our customers are really clear that McDonald's is a treat in their kids' lives and it helps them out.
We do have great licensed characters, and 94% of parents want us to keep offering the toy. It's easy to make fries fun, but we need to make sure we use the licensed characters to make healthy food fun -- in the "Bee Movie" window we had pineapple and grape bags that looked like bumble bees.
In the U.K., you can only advertise to children food that is not high in fat, salt and sugar. Nearly 80% of our Happy Meals are not high in fat, salt and sugar, including the most popular combination, so we are advertising balanced food choices to kids.
Ad Age: Do you feel McDonald's is permanently under attack over the obesity issue?
Ms. McDonald: Obesity is genuinely a real problem and it's ridiculous to pretend it's anything otherwise. It is our lifestyle that is the problem -- but a brand that is as big as McDonald's and has a lot of families visiting it does have a role to play.
We don't want to tell people what to do, but we provide customers with nutritional information so they can make informed choices.
Also, nutritional science does advance, so we can continue to preserve the taste that people love while reducing the saturated-fat content, so that's a role we can play to help make realistic small changes that people can stick to in their daily lives.
Ad Age: Has the credit crunch affected your marketing plans?
Ms. McDonald: We are in a very good place because of the investment we've already put in and our affordability. We are going to be increasing our advertising budgets quite significantly this year.
As I sit here now, the marketing plan I put in place for 2009 back in the autumn I haven't had to change because we are close enough to consumers to understand what we think we need to do. But it would be silly of me to sit here and say it ain't going to change this year at all.
We have put in place extra consumer tracking to ensure that we can really sense if there is a change in consumer attitude and mindset, so we can as far as possible see that before we see behavioral change.
Ad Age: Are you opening or closing restaurants in 2009?
Ms. McDonald: We are planning to open up to about 20 restaurants, and we're not planning on making any closures. We recruited about 4,000 people in the third quarter last year.
Ad Age: Are you shifting toward more online advertising?
Ms. McDonald: Around 9% of our spend is online and that won't fluctuate wildly; it's round about the right level. We are a mass marketer, so TV does remain a really good medium for us to use. We recruited Razorfish last year, and I just want to experiment and have more fun with online.
Ad Age: Do you have the CEO's ear and what kind of relationship do you have with the CFO?
Ms. McDonald: [U.K. CEO Steve Easterbrook] works very closely with the senior execs that help him lead the business -- the CFO, the COO, chief people officer and myself. Steve has been with the business since 1993 and has a fantastic understanding of how all areas of the company operate. He also has an instinctive understanding of our customers and genuinely puts the customer at the forefront of his thinking -- this is a great advantage for marketing. Steve has a finance background rather than a marketing background, so our skill sets complement each other and he gives me space to develop marketing strategy and tactics. But his informed insight means he is able to challenge constructively and help identify the best way forward. We also both have young children and it is good to work closely with someone who understands the challenges of balancing a demanding role with family life.
I also work very closely with our CFO, Brian Mullins, and we will discuss and challenge each other on a wide range of topics from media strategy through to pricing and supply chain. It's a really strong partnership -- we are all very clear about what we are trying to achieve and value each other's experience and perspective.
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