Leo Burnett has won an agency shootout for ideas to refresh the McDonald's brand, according to people familiar with the matter. Its concept is likely to appear in a significant campaign next year or perhaps late this year, the people said.
Burnett is already on the McDonald's agency roster for Happy Meal work, as well as for marketing services work via its Arc arm, but DDB has long been McDonald's lead creative agency for national advertising and digital. McDonald's invited both to pitch ideas for a brand refresh, the people said.
Burnett, part of Publicis, is likely to handle the bulk of any creative work introducing the refresh, according to the people. DDB, part of Omnicom Group, is expected to stay on McDonald's national ad business, but the win for Burnett's idea is a boon that could mean additional work for Burnett in the future.
Though the refresh will not be a complete departure from the brand's longstanding "I'm lovin' it" messaging, it is expected to evolve it. Given the global reach of "I'm lovin' it," Burnett's concept seems likely to reach beyond the U.S., but it is not clear how any such global execution would ultimately be assigned among agencies. DDB, Omnicom sibling TBWA and Burnett all handle work for McDonald's outside the U.S.
Burnett described its concept at a meeting last week with McDonald's marketing executives, franchisees and agencies to discuss, among other things, the chain's future marketing calendar, according to people familiar with the meeting. U.S. CMO Deborah Wahl spoke at length about ensuring that the quality of the food was a thread that would run throughout the company's initiatives, including its communications.
A McDonald's spokeswoman said Wednesday the company is always working to keep its creative and communications fresh.
"We value all of our agency partners who help us share and engage with different audiences," the spokeswoman said in an email. "It's highly premature and inappropriate to speculate about early creative concepts that were shared at an internal meeting, meant to inspire the audience. There's nothing more to report at this time."
Spokeswomen for Burnett and DDB declined to comment.
The move comes as McDonald's faces intense pressure to reverse its ongoing sales slide. The chain's sales growth began slowing in early 2012 and has more recently turned to declines.
In the second quarter of this year, its U.S. sales in stores that have been open for at least a year slipped 1.5% from the period a year earlier, following a 1.7% decline in the first quarter.
Executives began vocalizing concerns about the buiness late last year, setting out priorities such as improving service and operations by, for example, reevaluating complicated menu items that were slowing service. They also said they would focus more marketing on its coffee business, an area of the menu in which executives have long had faith.
This March, the chain noted that its U.S. business was both its largest and in most need of help. McDonald's global same-store sales last year grew 0.2%, while U.S. same-store sales declined 0.2% and comparable guest counts declined 1.6%. Calling 2014 something of a "reset" year, executives reiterated their commitment to paring down the menu to focus on core products, as well as improving marketing and investing in digital. McDonald's has been making new steps in digital with tests in mobile payment and the opening of a San Francisco office led by chief digital officer Atif Rafiq.
But in its second quarter earnings call two weeks ago, the chain seemed to extend the "reset" time frame, saying it's taking the next 18 months to sort itself out.
McDonald's is partly battling a shifting mindset in which consumers are increasingly seeking out food at fast-casual chains and elsewhere that they perceive as fresher and healthier. CEO Don Thompson said during the second quarter earnings call that the chain needs to work to become a more trusted and respected brand.
Pressure on agencies
McDonald's put pressure on its agencies last fall to produce work that would help lift sluggish sales. Some people close to the McDonald's business said that the chain had even reached out to shops outside its usual stable of agencies for project work, though the chain at the time said it did not put its agencies "on notice" or put accounts into review. After U.S. CMO Neil Golden left and Ms. Wahl took over that role, conversations with potentially new shops were quelled, executives familiar with McDonald's marketing business said.
Ms. Wahl has been relatively quiet publicly since she joined McDonald's in January, but the chain has made a number of changes under her leadership. For one, it rejiggered its marketing department. Marketing at the Golden Arches used to be organized by product, with a lead for beef or chicken, for instance, but it is now organized by consumer groups such as millennials, families and adults.
Ms. Wahl also mixed up some of the senior marketing executives at McDonald's, allowing her more direct oversight than her predecessor of areas such as agency relationships and partnerships with companies like Disney or the NBA. Joel Yashinsky, McDonald's CMO in Canada, was also recruited to the U.S. business recently, although it's not yet clear what his new role will entail.
Work to do abroad
McDonald's sales woes aren't limited to the U.S. Further compounding its problems is a recent meat scare in China. McDonald's and Yum Brands' KFC were both in the hot seat in late July for working with a supplier that sold meat past its expiration date. McDonald's responded by pulling meat from many of its China stores, but said this week that it hopes to put burgers and chicken products back on the menu in many Chinese stores within a week.
All the same, McDonald's on Monday posted a regulatory filing that said that the incident puts the company's 2014 sales "at risk" and that its business in China, as well as in other markets like Japan, "are experiencing a significant negative impact to results." The chain said it hasn't determined how much the issue will impact the company, but noted that 10% of its revenue stems from the affected markets.
DDB won McDonald's national ad business from Burnett back in 1997.