Burger King – the Turning Point?

 
In the last few years fast-casual chains, such as Five Guys Burgers in the US, have been eating up market share by offering fast service and higher quality items. While Burger King failed to react to this and stuck to its old formula, it prompted many of its rivals to start their transformations, which eventually resulted in Burger King losing its number two title in the US to Wendy's earlier this year. Nonetheless, after 2011 full year sales declined 3% (compared to 2010), in March 2012 Burger King announced that it too will adapt its business strategy, introducing new initiatives such as a wider food offering, to broaden its appeal. An analysis by Nicole Parker-Hodds, Associate Analyst, Planet Retail.
 
Changing core consumers
 
This new direction is not completely surprising; Burger King has never changed its strategy of focussing on teenage and early twenty year old males as its main consumer base - now an outdated approach. It concentrated on hamburgers, especially the Whopper burger, and had its marketing campaigns revolve around its mascot The King, that aimed to bring humour to the advertisements to appeal to its youthful audience. This strategy had been successful until the latest recession, when rising unemployment and lower disposable income led to reduced spending by its core customers - and hence fewer visits to its stores. This affected Burger King's whole business because it was a slow mover in terms of diversifying. Because its main competitors were already targeting a wider audience Burger King was doubly affected in market shares, because it needed to readjust all its strategies - including its menu, marketing and store design - to target a new consumer, women. Although this is a time consuming and expensive move, it is also a critical one for Burger King. To help the hamburger chain battle with the economic downturn, and to reduce investor pressure, Burger King had a change of ownership. Burger King has had a chequered past in terms of ownership, having swapped between being a public company and being owned privately more than once. Most recently, in 2010, Burger King was acquired by Blue Acquisition, a private equity company owned by 3G capital, to provide the capital for the company to readjust its strategy and to take time away from the ‘limelight' following the harshest recession in our lifetime. However the company announced in April this year that it will once again become public through a second IPO (Initial Public Offering) - to sell off 29% of the business for US $1.4 bn to Justice HoldingsLTD, a UK-based investment firm who will list itself on the New York Stock Exchange.
 
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| 13 June 2012 |