Burger King Case Study

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DATAMONITOR VIEW

CATALYST

After years of poor sales, Burger King has turned its business around and now enjoys healthy business growth. This case study looks at how the company did this by refocusing its marketing towards the Superfan, namely young adult males who have a penchant for fast food.

SUMMARY

• Diageo was accused of neglecting Burger King under its ownership, letting the brand fall off the radar at a time when fast food in general was reporting favorable growth. The fast food chain's fortunes began to change after it was sold to a private equity triumvirate, which set about investing in promoting the business to the devoted fast food eater. This focus was a success, leading Burger King to gain 'cool status' in many peoples' eyes and to achieve strong growth.

• Burger King's focus since being sold has been in targeting the Superfan, that is the 18–35 year old male who enjoys fast food. Company marketing efforts have focused on appealing to this consumer type, using both traditional and new media as a means to gain their attention.

• Burger King's marketing has often been controversial, with two 2008 efforts standing out. The Whopper Virgins documentary, in which members of remote communities were given burgers to try for the first time, was deemed offensive and patronizing, while a Facebook application that encouraged people to delete friends for burgers was perceived as against Facebook policy and disenabled. However, such innovative marketing successfully appealed to the Superfan's sense of humor and desire for novelty.

• Burger King has only recently addressed health issues, as it firmly stands by the belief that the Superfan values taste above everything else. However, new menu options have appeared that are healthier, showing that the company now acknowledges the importance of appealing to the health demands of a wide range of consumers outside the Superfan label.

CASE STUDIES

Burger King case study

Targeting the Superfan as a means of retaining growth in the fast food

market

Reference Code: CSCM0246 Publication Date: April 2009

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ANALYSIS

Burger King suffered years of decline but achieved a turnaround after a marketing overhaul

McDonald's dominated the fast food sector for many years

For years, McDonald's was by far the leading fast food company, dominating the sector in terms of sales, perceived quality and consumer preference. However, in recent years Burger King (BK) has begun to fight back, reporting impressive sales growth due to a change in the way it markets the business; instead of trying to appeal to the everyday consumer, which it found to be an impossible task, the company has focused on the Superfan, defined as an 18–35 year old male with a love of fast food.

BK still cannot hope to beat McDonald's in terms of sales at present, with the latter recording revenues of over $5.6 billion for the fourth quarter of 2008 compared to BK's $634 million for the same period. Its restaurant outlets are also dwarfed by McDonald's, which has 30,000 global outlets compared to BK's 11,600. However, where it is attempting to gain appeal is as a 'cooler' venue where consumers, particularly the Superfan, want to be seen. This case study looks at how it is achieving this through innovative marketing campaigns.

Burger King's sale to a triumvirate of private equity firms in 2003 was the impetus for change

BK was founded as a single restaurant in Miami in 1954 and steadily built up its fast food empire to become one of the leading fast food companies in the world with over 11,600 global restaurants. However, the chain's popularity began to wane under the ownership of Diageo, which bought BK in 1989 when Diageo was known as Grand Metropolitan. Diageo was criticized for neglecting the brand in favor of focusing its resources on its beverage arm.

Diageo sold the fast food brand to a consortium of private equity companies in 2003 for $1.5 billion. The consortium was led by TPG Capital, L.P., with associates Bain Capital and Goldman Sachs Capital Partners. At the time, BK had recorded seven straight years of sales decline and footfall had dropped by 22%. This was during a period when the fast food industry as a whole was enjoying healthy growth. The new owners sought to rejuvenate the brand and re-establish it as a fast food venue of choice for a key group of fast food customers; young males which it terms the Superfan.

This strategy has been a success for BK. The company posted record worldwide revenues of $2.46 billion in 2008, a rise of 10% from the previous year and its 18th consecutive quarter of positive sales growth.

Although not immune to the downturn the company continues to grow, with plans for Brazil and China

expansion

The company's latest results are not as positive, with revenue for the quarter ending December 2008 rising 3% to $634 million, missing Wall Street's expectations by $0.04 per share due to a stronger dollar. As well as the strong dollar, the

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company faced higher ingredient prices, both of which impacted its profitability. With the recession ongoing, the company faces a tough time in increasing consumer footfall, as does the rest of the foodservice market.

However, the company aims to play to its advantage, which is providing affordable fast food to consumers who are more willing to trade down in economically harsh times. With this in mind, BK has implemented an extensive growth strategy for 2009, focusing on expanding into growth markets such as China and Brazil. The company plans up to 400 new restaurants in 2009 that are focused on these areas, where there is less competition and an enthusiastic new customer base. This could be a successful strategy, given that its home market, the US, is saturated with fast food companies all looking to serve the same consumers.

Targeting the Superfan rather than every demographic has been a key growth strategy

The Superfan is considered to be an 18–35 year old male with a love of fast food

BK has focused on marketing to the Superfan since it was sold by Diageo in 2003, after spending years failing to market the brand to everyone. The company developed a profile of its Superfan after undertaking anthropological research, which found that the image of a flame grilled burger had strong masculine connotations that resonated strongly with this group.

"Our name is powerful. We cook over fire. There's a certain masculinity, an adolescence to our brand and our product".

Russ Klein, Burger King chief marketing officer (Contagious magazine, 2009)

Through its research, the company developed the following profile of the Superfan: a male aged between 18 and 35 years old who visits BK five times a month, but eats out 43 times a month. These consumers will go to a fast food restaurant other than BK 11 times a month. While they represent just 18% of the chain's customers, they account for about half of all visits to the stores. The Superfan is a frequent user of the internet and likes to play computer games. He loves irreverent humor, does not take himself too seriously and is open to new forms of promotion, preferring his marketing risqué but honest. Consequently, the company has focused on developing marketing campaigns that focus on appealing to this consumer type, a strategy which has been a success.

Burger King's mascot, branding and marketing are intended to be 'cool', to relate to these Superfans

BK has targeted the Superfan in a number of ways, related to its mascot, fast food branding and marketing campaigns.

One of the company's first moves to target this consumer was to resurrect the personage of the Burger King, who featured in the company's adverts in the 1970s but had been used infrequently since then. Instead of recreating the old fashioned image of the King, however, the company instead chose to resurrect him in the image of a real person dressed as the King but wearing a mask. BK describes the look of the new King as the "cool uncle", but his immobile, masked expression is considered to be disturbing by many. CEO John Chidsey stated that the King was given this look to generate consumer interest in the brand, noting that it is "a mascot that causes chatter and gets lots of play time on YouTube. If we'd made him

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plain vanilla, like our friends with the clown, we wouldn't have generated the buzz" (USA Today, 2007). The look of the King may not appeal to all consumers, but taps into the irreverent humor of the Superfan.

The company resurrected its "Have It Your Way" slogan alongside the re-invention of the King. Originally introduced in the 1970s as a response to McDonald's supposed rigidity, the slogan has come to symbolize an empowering quality of the brand; the intention is that customers feel empowered by BK as it gives them choice and control over their food.

BK's food names are also designed to appeal to the Superfan, aiming to sound, taste and look hipper than rival brands. These include the Stacker, which is a double cheeseburger and the Hold-em, a warm wrap that comes in a "holster" that fits into the cup holder of a car. Such products have a more inventive air about them than would be the case if the products were given conventional names, which could appeal to the innovative streak of the Superfan.

The way that the company targets the Superfan through specific marketing campaigns is explored in detail below.

Burger King's marketing has been controversial but effective in targeting the Superfan

BK utilizes both traditional marketing media and new media to promote its brand, providing a mix of mass communication and niche exercises. Its adverts are deliberately designed to be innovative, strange and provocative, aiming to provoke a positive reaction from the Superfan and encourage discussion of the brand, even at the expense of alienating non-Superfan consumers. Russ Klein, BK's chief marketing officer, noted that the company's second place positioning enables it to be more edgy with its campaigns as it is "protected as a challenger" (Contagious magazine, 2009). It is this edginess which strongly appeals to the Superfan and strengthens the brand's appeal to them.

Pre-2008 campaigns successfully referenced popular culture to gain Superfan appeal

BK's campaigns have often focused on referencing popular culture as a means to gain the interest of the Superfan, which BK perceives as a key devotee of popular culture (see Figure 1). For example, in 2006, the company produced a set of BK games for the Xbox 360 console, priced at $3.99 each, which were sold with the purchase of a value meal. BK sold 3.5 million of these games, showing how it had successfully targeted Superfans through their love of gaming, which is a key aspect of modern popular culture.

A partnership with The Simpsons Movie in 2007 also targeted a strong popular culture icon, enabling users to create Simpsons-style photos of themselves at SimpsonizeMe.com. The site reportedly attracted millions of visitors, benefiting BK as it was the King's face that was used as an example Simpsonize picture when consumers entered the site.

The popularity of reality and hidden camera shows also prompted the company to develop the Whopper Freakout campaign in 2007. Customers at a BK store were secretly filmed as they were told the Whopper was no longer being produced. The camera recorded their reaction and the results were posted online. After two months, the video had been played 3.3 million times on the whopperfreakout.com website and spawned several spoofs. BK attributed a 5.4% sales rise for the quarter after the advert was aired to the Freakout campaign.

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Figure 1: Burger King campaigns are innovative and wide ranging

The Whopper Freakout,

Burger King Xbox game and

Simpsonize web tool have

successfully targeted

Superfans by referencing

popular culture

Source: Datamonitor analysis D A T A M O N I T O R

The Whopper Virgins documentary saw BK conduct a taste test among remote peoples, drawing

controversy

The company's 2008 campaigns included the Whopper Virgin documentary, which filmed people in remote locations in Romania, Thailand and Greenland trying a burger for the first time (see Figure 2). The idea was to conduct a "pure" taste test with people who had no preconceived notion of fast food. They were asked to vote on their favorite tasting burger, either the Big Mac or the Whopper; BK stated that the overwhelming favorite was the Whopper. The films documenting the discoveries were posted on whoppervirgins.com, with visits to the site topping 767,000 in December 2008.

The campaign was one of the most controversial the company has produced, with critics saying that it exploited remote civilizations with the worst kind of cultural imperialism. The Boston Globe commented that it was "an insane reenactment of the worst of American colonial history" (2008).

The campaign certainly created a buzz, however, and generated much public interest. Alex Saliers, a manager with the company that handles the company's PR defended the campaign, stated: "Burger King went into this with a lot of research and dedication to cultural integrity. People will always have different opinions, and we try and we try and speak to people who might not understand where we're coming from. We care about that" (Contagious magazine, 2009).

The campaign highlights how the company is adept at grasping an aspect of popular culture in its marketing; in this case, reality television. It is willing to be controversial in order to gain publicity and appeal to the Superfan, even if this means alienating a large part of the public who may take offence.

Whopper Sacrifice asked people to delete friends on Facebook for a free burger, but was deemed cruel and

dropped by Facebook

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Another controversial marketing campaign followed Whopper Virgins. Whopper Sacrifice aimed to capitalize on the popularity of the social networking site Facebook, calling on people to delete 10 of their Facebook friends in order to receive a free Whopper (see Figure 2). When a friend was dropped, a line appeared in the news feed section of Facebook announcing that the person "had dropped" a friend for a Whopper, both people being named in the feed. This open information share created a viral effect as users rushed to clear out unwanted friends in exchange for burgers. However, the application was shut down after two weeks by Facebook because it violated the company's privacy policy; users are not supposed to know when they have been dropped. Nevertheless, 234,000 friends were dropped during these two weeks and 20,000 free Whoppers distributed, highlighting how popular the application was.

The campaign highlights how the company is adept at identifying a fashionable part of popular culture, in this case social networking sites, and utilizing it in its marketing efforts.

A Burger King aftershave sold out within days, successfully targeting the Superfan with a tongue in cheek

product

A less controversial recent campaign was the creation of a BK aftershave called Flame (see Figure 2). The product was available over the Christmas 2008 period and designed to evoke the scent of a freshly flame-grilled Whopper. It retailed at $3.99 a bottle online, and in-store as part of a deal with retail outlet Ricky's in New York and LA. The aftershave's website, firemeetsdesire.com, showed a half naked King lying before an open fire and attracted 636,000 visitors. The spray sold out within four days, showing that it successfully attracted Superfans with its tongue in cheek styling.

Rob Reilly, co-executive creative director at Crispin Porter + Bogusky, which is one of the main advertising agencies used by BK, noted that the campaign appealed to a wider range of people than just the Superfan: "How do you stand out in the holiday clutter? You don't sell hamburgers, you sell the scent of it as a stocking stuffer. That was how we were able to reach not just the Superfan, but his mother or girlfriend" (Contagious magazine, 2009).

The campaign was a success due to its novelty, as the product itself and its tongue in cheek website appealed to young male humor and stood out among other joke presents of the season. What the aftershave smelt like was almost irrelevant, as people were purchasing it for the novelty value rather than its fragrance, but there is no doubt that it provided BK with ample exposure in the process.

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Figure 2: Burger King has appealed to the humor of the Superfan with its latest marketing drives

Burger King’s 2008 marketing included the controversial Whopper Virgins and Whopper Sacrifice campaigns and the tongue in cheek limited edition launch of the Flame aftershave

Source: Datamonitor analysis D A T A M O N I T O R

Burger King has addressed the concerns of non-Superfan customers with healthier

offerings

Taste has traditionally been more important than health on Burger King's agenda

In contrast to other industry players, BK has not focused on making its food healthier in the past, believing that the Superfan values taste over health when making food choices. In 2005, for example, the company pulled out of a joint initiative in the UK between the food industry and the Food Standards Agency (FSA) to reformulate fast foods to make them less unhealthy, with less salt, sugar and fat, stating it wanted to focus on providing tasty foods. By focusing on taste, the chain aimed to gain a competitive advantage and achieve a reputation for producing tastier burgers.

Table 1shows that BK's Whopper has the highest number of calories of a burger from three leading burger chains, with 640 calories, compared to 560 calories for a Big Mac and 440 calories for a Single burger at Wendy's. As taste is the primary selling angle, the health of the burgers is perceived as less important, with regular taste tests that feature in the company's marketing, such as the Whopper Virgins campaign, aiming to highlight that Whoppers taste better than rival burgers, while not mentioning the health aspects of the burger.

While this focus on taste is appealing to the Superfan, health is an issue of growing importance to a large sector of society. Therefore, in order to remain competitive, the company has had to respond to this growing demand for healthier foods. Its rivals have already made health changes to their menus and, with this in mind, BK has reformulated some of its menu items, as discussed below.

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Table 1: Calories and fat content in the leading burgers of fast food chains McDonald's, Burger King and Wendy's

Restaurant Burger Type Calories Fat

Burger King Whopper 640 39g McDonald's Big Mac 560 31g Wendy's Single with everything 440 23g

Source: askmen.com D A T A M O N I T O R

Unhealthy children's diets and the obesity epidemic have prompted the company to address health issues

more vigorously

The growing media focus on childhood obesity and the perceived link with fast food has prompted fast food companies to respond to public demand and change their kids-focused menus. Whereas BK was reluctant to respond to health criticisms in the past, due to its focus on the Superfan, the company has begun to change its stance in a bid to woo parents and families.

The health trend can no longer be ignored by fast food companies, as it is an issue that many consumers consider high priority. Datamonitor's 2008 consumer survey (shown in Table 2) highlights the propensity with which consumers are taking active steps to eat more healthily, with nearly half of respondents stating they have done so more frequently in the past six months. This shows that fast food outlets should respond to this growing trend by offering healthier meal options.

In 2008, BK began to offer healthier kids' meals in the US after seeing that McDonald's had been successful in its similar offerings. The new BK kids' meals consisted of apple "fries" and a low fat caramel sauce, along with Kraft macaroni and cheese, and low-fat milk. Russ Klein, president of global strategy, marketing and innovation at BK noted: "A large part of our customer base is parents with children. As a parent, the challenge is always trying to get the kinds of things you want to but have some dimension of fun" (msnbc.msn.com, 2008). The initiative was a change of tack for the company and shows that BK has begun to acknowledge the importance of families as a key customer, as well as young males.

At the same time, the company began to respond to government concerns in the UK over the obesity crisis by putting calorie counts on its menus, along with 17 other UK food chains. The Food Standards Agency, which sponsored the initiative, said it hoped that all UK restaurants would eventually sign up to the scheme and believed that consumers, armed with the information, would choose healthier options.

It could be a challenge for BK to juggle the health demands of consumers with their desires for tasty snacks, as consumers often believe that healthy foods cannot be tasty. However, the health demands of consumers cannot be ignored in a society that is increasingly focused on attempting to eat healthier.

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Table 2: Consumer survey: the propensity to take active steps to eat more healthily more or less often, in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008

QUESTION: In the past SIX MONTHS, please indicate to what extent you have done the following more or less frequently? Taken active

steps to eat more healthily

France Germany Netherlands Italy Spain Sweden UK US

Total more 41.9% 28.3% 32.8% 48.7% 44.1% 35.8% 48.0% 51.9% No change 53.7% 47.7% 61.4% 48.3% 51.4% 60.2% 48.2% 42.3% Total less 4.4% 24.0% 5.7% 2.9% 4.5% 4.0% 3.9% 5.6%

Australia Brazil China India Japan Korea Russia Average

Total more 58.6% 72.0% 71.0% 80.4% 25.7% 51.1% 51.4% 49.4% No change 38.8% 24.2% 27.2% 15.9% 70.6% 41.9% 37.5% 44.3% Total less 2.6% 3.8% 1.7% 3.6% 3.8% 7.0% 11.0% 6.3%

NB: 'Total more' is an aggregation of respondents who stated ‘significantly more’ or ‘more’. 'Total less' is an aggregation of respondents who stated ‘significantly less’ or ‘less’

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APPENDIX

Case study series

This report forms part of Datamonitor's case studies series, which explores business practices across a variety of disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and insurance, pharmaceuticals and software.

Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations, highlighting the ways in which the company has become one of the best in its field or how it deals with different problems encountered within that sector.

Methodology

A variety of secondary research was carried out for this case study. This included an extensive review of secondary literature and other in-house sources of information.

Secondary sources

• Burger King: Renaissance Man; Contagious magazine, 1st Quarter 2009 • Burger King's greasy campaign, Boston Globe, December 2008

• Burger King goes after moms with new ads, msn.com, June 2008

• Burger King is desperately seeking pop culture's holy grail: to be cool, USA Today, February 2007

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