Just How Happy Does the Happy Meal Make McDonald's?

Even at Under 10% of Sales, Iconic Kids' Line Is Bigger Than Panera, IHOP

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CHICAGO (AdAge.com) -- Happy Meals have taken a bit of a beating lately. First there was that six-month-old Happy Meal hamburger that didn't grow mold or decompose, and then San Francisco tried to ban toy inclusion in kids' meals. With the iconic product in the critics' crosshairs, we wondered, just how valuable is the Happy Meal to McDonald's?

The company is rather guarded about specifics, but a spokeswoman offered that Happy Meal sales account for less than 10% of McDonald's U.S. business. Given McDonald's massive size -- it notched about $30.9 billion in U.S. systemwide sales in 2009, according to Ad Age's DataCenter -- that's nothing to sneeze at. "If Happy Meals account for less than 10% of McDonald's total sales ... [that still] represents a significant portion of their business," said Darren Tristano, exec VP at Technomic. "To put it in perspective, that would be more than Panera Bread, IHOP or Dairy Queen chains sold individually in the U.S. in 2009."

Parents in San Francisco want to ban toys kids' meals, but the issue is unlikely to go national.
Parents in San Francisco want to ban toys kids' meals, but the issue is unlikely to go national. Credit: AP Photo/Eric Risberg

Sales aside, the value of the Happy Meal, which has been on the McDonald's menu nationally since 1979, is in the brand itself and the role it plays in getting families to chose McDonald's over a rival chain. "It's hard to have a clown as your mascot and not have a Happy Meal. It's something McDonald's is known for. Regardless of sales, it's still a family dining restaurant and the Happy Meal contributes to that. It makes it fun for kids," said Eric Giandelone, director-food service research at Mintel. "It's one of those products that's so associated with the brand -- it may be more associated with McDonald's than the Big Mac. It's iconic."

In Technomic's 2009 Kids and Moms Consumer Trend Report, kids "overwhelmingly chose McDonald's as their favorite fast-food restaurant," with 37% of kids surveyed choosing it as their favorite. The second-most chosen was Subway, with 10% of kids claiming it as a favorite. About 8% of kids surveyed said Burger King was their favorite fast-food restaurant.

More important is why they are choosing it. According to Technomic's report, the "influence of a toy is much stronger for kids than parents in a kids' meal-purchasing decision." About 87% of six- and seven-year-old kids and 80% of kids ages eight and nine said they enjoyed getting a toy with their kids' meals, according to the report. "The Happy Meal has become a staple in the American family lifestyle, " said Mr. Tristano.

Richard Adams, a franchise consultant who works primarily with McDonald's franchisees, said he doesn't see the restrictions on Happy Meals becoming a national issue, but if they did, McDonald's would "lose sales not only on Happy Meals, but on the sales of the meals from those parents."

And, in fact, the company has been less reliant on the Happy Meal than in years past, he said. "Happy Meals have seen some decline in recent years as a percentage of sales. That's because the menu is so much broader than it was."

McDonald's has been upping its U.S. measured media spending on Happy Meal, according to WPP's Kantar Media. In the first half of 2010, the fast feeder has spent $45.6 million on the product. In 2009, it spent $69.5 million, compared with $65.3 million in 2008. But that's still a comparatively small slice of its budget. McDonald's total U.S. ad spending for 2009 was $873.3 million, compared with $814.2 million in 2008. In 2009 and 2008, Happy Meal spending accounted for about 8% of all U.S. measured-media spending. For the first half of 2010, it accounted for 10%.

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