Burger King Global Sales Up in 2013, But North America Down

Fast Feeder Blames Polar Vortex and Increased Value Competition

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Burger King's 2013 results may not have been as strong as 2012's, but the chain is touting its U.S. value positioning and fewer but "more impactful" product rollouts such as Satisfries as a boon for the company.

In an earnings call today, North American President Alex Macedo said that the company's stateside strategy is to deliver compelling value and focus on fewer and "more impactful" product rollouts that he said are "easy for customer to assimilate" to. He touted the two big product rollouts in the fourth quarter: the Big King, a burger that emulated McDonald's Big Mac and was introduced as part of Burger King's two for $5 sandwich promotion and its BBQ Rib sandwich. The latter was launched in November for $1 and aimed to capitalize on the popularity of McDonald's McRib.

Burger King's Satisfries
Burger King's Satisfries

The chain posted its second consecutive year of same-store global sales growth, up 0.5% for the year compared with a 3.2% rise in 2012. The chain's U.S. and Canada same-store sales for the full year were down 0.9%; they were up 3.0% in 2012.

Though sales in the U.S. were up slightly in the fourth quarter, they hit a snag toward the end of the year thanks to increased competition and the polar vortex. For fourth quarter 2013, global same-store sales were up 1.7%. Same-store sales for the fourth quarter in the U.S. and Canada were up 0.2%.

The company said that the severe winter weather across the U.S. continues to impact the company's sales, and results for the new year have thus far been negative.

Burger King is beefing up the Big King, announcing this week that it will weigh 4 ounces uncooked versus the 3.2 ounces that the McDonald's Big Mac weighs, but at no additional price.

Operational complexity
Mr. Macedo said that the Big King, along with a Spicy Original Chicken Sandwich -- a line extension of its Original Chicken Sandwich introduced in January -- is a boon for the chain because it gives customers a good value, while adding little "operational complexity" in the kitchen.

"We believe this simplifies execution for our crew members and drives profitability for our franchisees," said Mr. Macedo. "When it comes to innovation, this will be our formula as we continue to build the brand: Deliver great products that address our consumers' and our franchisees' needs."

Burger King's touting of its product rollouts lacking "operational complexity" is in stark contrast to statements McDonald's execs have made in recent month. Between March and July of 2013, McDonald's rolled out four products -- McWraps, blueberry-pomegranate smoothies, Egg White Delight McMuffins and its new line of Quarter Pounders -- at a pace that was too speedy and complex, which slowed down operations, McDonald's executives said.

The fourth quarter was also the first full quarter of results for Satisfries, its lower-cal fries offering. In what seems to be a resetting of expectations for what it originally indicated would be a blockbuster, the company didn't address sales figures. Mr. Macedo said only that Satisfries "continue to drive traffic and are incremental to our classic French fry purchases. They also differentiate the Burger King brand as a true innovator in the [fast food] industry."

Traditional fast food chains like McDonald's and Burger King have been seeing increased competition not just from other fast-food outlets but from fast-casual chains that are increasingly appealing to consumers willing to spend more for better perceived quality.

McDonald's, Burger King and Wendy's in 2013 all focused heavily on value. In October, McDonald's announced its Dollar Menu & More, which gave the chain the flexibility to add pricier items to its value menu. That move followed Wendy's revamping its value offering and Burger King heavily promoting value propositions like its 2-for-$5 sandwich deal. Wendy's in December started selling 99-cent spicy chipotle burgers and chicken sandwiches.

Agency shifts
But despite the aggressive value promotions, chains are still struggling to achieve significant growth. McDonald's for the full year posted a global same-store sales increase of 0.2%. For the fourth quarter, global comparable sales decreased 0.1%, with a 1.4% decrease in the U.S. Third-quarter 2013 U.S. same-store sales rose 0.7% while global same-store sales were up 0.9%. January sales are expected to be relatively flat for the Golden Arches.

Burger King started the year off splitting with its lead creative agency, Mother in New York. Just as the global agency search got underway, the company added Code & Theory as its digital agency, replacing digital shop Big Fuel.

Burger King posted better-than-expected quarterly profit, up 37%. It also also posted solid growth in Asia-Pacific for the fourth quarter, with same-store sales up 6.2%, driven by Australia and South Korea.

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