BBP0014 Burger King – Revitalizing the Brand “Burger King is a strong consumer brand. Yes, it’s in difficulty ... But the brand is going to survive. ... Given the fact that so manypeople have tried to turn it around, it will be a real badge for the ones who can finally do it.”1 – Dennis Lombardi, Executive Vice President, Technomic Inc, Food Service Consulting Firm, Chicago “Our passionate goal is to build a clear, strong and differentiated brand through a foundation oftruly excellent and consistent restaurant operations combined with highly effective advertising. This will benefit consumers, franchisees and employees as well as our communities.”2 – Brad Blum, CEO, Burger King “We are not a brand that lacks fame, we are a brand that lacks emotional connection.”3 – Russ Klien, Chief, Global Marketing, Burger King INTRODUCTION By 2003, US-based Burger King, the second largest burger chain in the country after McDonald’s, had experienced a decline in its sales for the previous five years. Burger King’s US sales dropped to $7.75 billion in 2003 from $10.3 billion in 1998. The growing negative attitude towards fast food, aggressive competition and anti-obesity campaigns among others, attributed to the fall in sales. In addition, several internal factors like improper brand management, lack of customer orientation and flaws in new product positioning led to Burger King’s falling sales. A survey by Interbrand, a brand consulting firm, revealed that the brand value of Burger King dropped by 22.8% from $2.7 billion in 2000 to $2.12 billion in 2003 (Annexure I). 4 Burger King that offered a variety of burgers, sandwiches and salads, had in its product profile some of the blockbuster brands in the fast food industry like the Whopper sandwiches, Chicken club sandwiches and TenderCrisp sandwiches. By 2002, the market share of Burger King in the $45.4 billion fast food hamburger market in the US was 18%, compared to McDonald’s’43% market share and Wendy’s with 12.7%. The chain was under a threat of being overtaken by Wendy’s, the third largest chain in the country, which witnessed a 4.5% growth in its same store sales in the last quarter of 2002. Many franchisees of Burger King went bankrupt due to the steady fall in sales.5 1 Reinan John, “Burger King’s gopher state gurus”, www.startribune.com, May 17th 2004 2 “Burger King selects advertising agency partners to drive new strategic brand initiatives”, www.hispanicbusiness.com, April 14th 2004 3 Horovitz Bruce, “Burger King zaps menu, image”, www.usatoday.com, March 22nd 2004 4 “New burger king shop hits the grill”, www.foodservice.com, August 15th 2002 5 “Burger King’s reign of error”, www.businessweek.com, March 29th 2004 This case study was written by Gayatri. D, under the direction of T. Phani Madhav, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a managementDo situation. TheNot case was compiled from published Copy sources. © 2004, IBSCDC. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. BBP0014 2 BURGERKING–REVITALIZINGTHEBRAND Amid the heavy fall in sales, franchisee complaints and dropping brand value, Bradley S. Blum took over as the CEO of the company in 2003. The major challenge that stood in the way of Burger King’s executives was the revitalisation of the brand that was reported to have lost the consumers’ attention. The brand no more delighted the customer, the new product launches were not in tune with the market needs and the advertising campaigns were ephemeral and ever changing. Under a new management, a major turnaround was undertaken to help the business revive its brand image. Organisational restructuring, change in management culture, new alliances with advertising agencies and menu overhaul were a few initiatives taken up by the company. In addition, to address the growing impatience among the franchisees over the falling brand value, Burger King attempted to revamp the brand with newer offerings, improved drive-through concepts and improved restaurant interiors. Franchisees were also awaiting a major turnaround in marketing plans under the new leadership. Larry Jaro, chairman and CEO ofAmeriking, the largest franchisee of Burger King, expressed the same and said, “Someone’s going to look like a hero here, this is a brand with a lot of potential that’s been mismanaged for 15 years. We need management with a long-term vision for the brand. People need to connect emotionally to the product.”6 BURGER KING – BACKGROUND The first Burger King restaurant was started in 1952 in Miami under the name, ‘Insta-Burger King’. Keith Cramer launched the chain that used instant broiler that could make 400 burgers in an hour. With quicker service as its USP, the chain became popular among the customers. Later, in 1954, David Edgerton renamed the chain as ‘Burger King’ and came out with an improved version of the broiler – the flame-broiled burger that was an instant hit. The same year, in June, David, along with Jim McLamore, started the Burger King Inc. In 1957, Burger King launched its Whopper sandwich for 37 cents a piece. Whopper was the first high-priced Burger King product. It was made of ripe tomatoes, fresh crisp lettuce and drill pickles and with its first ad campaign, ‘Home of the Whopper’ developed by a Miami-based advertising agency, Hume, Smith and Mickelberry, it was an instant hit. Burger King differentiated itself with its self-service ordering and comfortable outdoor seating and dining rooms. In1961, thecompany,headed byMcLamore and David, obtained itsfirst international franchisee rights. And in 1962, opened its first international Burger King franchisee in Puerto Rico, a Caribbean island. In 1967, identifying the need for financial liquidity, the company merged with the flour milling company, Pillsbury. BBDO (Batten, Burton, Dustin, Osborne) came out with the first promotional campaign for Burger King, ‘The bigger the Burger the better the Burger’. Bythe early 1970s, Burger King had a market share of 4% in the hamburger category. In 1974,Do BBDO launched anotherNot major campaign ‘HaveCopy it your Way’. Burger King came out 6 Spethmann Betsy, “Can a new marketing menu satiate consumers-and franchisees?”, www.promomagazine.com, January 1st 2001 BBP0014 BURGERKING–REVITALIZINGTHEBRAND 3 with a new concept of letting its customers choose the recipe of their burgers. Customers placed their customised orders which were fulfilled at all the Burger King outlets. Around 1024 combinations of orders were possible for the Whopper sandwich. In 1975, Burger King’s European operations were started in Madrid, Spain. The same year, Drive-through concept wasintroduced that catered to the ‘on the drive, while in car’ customers. Burger King named J. Walter Thompson as its advertising agencyin 1976.Anewad campaign, ‘Battle of Burgers’and ‘Aren’t you hungryfor Burger King now?’was launched. To emphasise it’s flame-broiling, it came out with the campaign, ‘broiling vs frying’. Burger King’s market share during this period increased from 7% in 1983 to 8.3% in 1985. However, some other campaigns undertaken by the chain proved to be failures. For example, its ‘Search for the Herb’ campaign that communicated a message that no person would have ever not tasted its Whopper burger, failed to deliver the message. Advertising Age stated the campaign as the ‘most elaborate advertising flop of the decade’. The advertisements challenged its customers to find a herb but failed to define a herb. While the company aimed at creating a buzz with the suspense, customers got irritated over the confusing ad campaign.7 Such ad campaigns and price hikes undertaken by the company dropped the market performance, raising concerns among McLamore and David. Later, in 1987, Pillsbury was acquired by Britain’s Grand Metropolitan, a consumer goods company involved in manufacturing and marketing of fast food and spirits, for $5.79 billion. In 1989, its ad campaigns like “Sometimes you got to break the rules” and “BK tee vee” with MTV, proved unsuccessful as customers found these advertisements loud, confusing and irritating. However, the Whopper brand of Burger King became the flagship brand, making around $1.7 billion annually. Many franchisees started expanding aggressively by taking loans. Amerking, the largest franchisee in the US, built around 20 stores a year. In 1990, Burger King launched ‘BK Broiler’, a flame-broiled sandwich and for the health-conscious customers, it switched to vegetable oil for frying French fries. It came out with an improved version of its ‘Have it your way’ campaign, ‘Your Way, Right Away’. By 1993, Burger King’s market share was 6.1% compared to 15.6% of McDonald’s. The sales were increasing at a slower pace compared to its rival’ssales. Some of the failed advertisement campaigns were attributed to the downside. It was felt that the chain lacked a proper mix of products and message.8 In 1999, to compete with McDonald’s in the French fries segment, Burger King launched its crisper french fries coated with potato starch. The company spent $70 million on the promotion of the new product. The advertisement campaign, ‘hotter, tastier, crisper’, challenged that its product was superior to McDonald’s. But, the product failed because of its poor taste and the ad campaign was reported to have exaggerated the superiority, which in reality was not offered.9 Burger King’s ever-changing advertisements sometimes confused the audience as to what they intended to convey 7 “Where’sDo herb”, www.geocities.com Not Copy 8 “Burger King zaps menu, image”, op.cit.