How cho­co­late fries and Pikachu turned around McDon­ald’s Ja­pan

Business Standard - - WORLD - LISA DU & GRACE HUANG

McDon­ald’s Ja­pan took a se­ries of hits start­ing in 2014 that threat­ened to crack its Golden Arches: a sup­plier was sell­ing ex­pired chicken, a hu­man tooth was found in french fries and a child was in­jured by a plas­tic shard inside a sun­dae.

Sales plum­meted to their low­est since the com­pany went pub­lic in 2001, and the chain closed hun­dreds of restau­rants. McDon­ald’s Corp in the US said it was con­sid­er­ing sell­ing its 49.9 per cent stake in the Ja­panese com­pany as losses piled up.

“I re­mem­ber think­ing at that time: ‘McDon­ald’s is over,”’ said Ichiro Fu­jita, a Tor­rance, Cal­i­for­nia-based con­sul­tant who helps bring for­eign restau­rant brands to Ja­pan. “A lot of people even said they might need to change the name be­cause the im­age was so bad.”

Yet CEO Sarah Casanova de­cided to coun­ter­punch. A com­pany lifer who took over McDon­ald’s Hold­ings Ja­pan in 2014 with lit­tle com­mand of Ja­panese, Casanova vis­ited all of the coun­try’s 47 pre­fec­tures to as­sure din­ers — es­pe­cially moth­ers — that her com­pany was im­ple­ment­ing safe­guards, and to ask them what they wanted from McDon­ald’s.

“It made us go out and lis­ten to cus­tomers,” Casanova, 52, said of the cri­sis. “We were not do­ing a great job of giv­ing them what they wanted.”

Armed with their feed­back, Casanova re­vamped the menu to add lo­cal flavours like the pork-and-ginger “Yakki Burger” and quirky head­line­grab­bing items like choco­late­cov­ered fries. She gave many out­lets a facelift and forged a part­ner­ship fea­tur­ing Poke­mon char­ac­ters. She cut off the trou­bled Chi­nese chicken sup­plier and in­tro­duced mea­sures so par­ents could trace where their chil­dren’s meals were com­ing from.

Since then, the shine has re­turned to the arches. McDon­ald’s Ja­pan stock closed at an all-time high September 11 as part of a 62 per cent in­crease this year. Shares dropped 1.1 per cent Fri­day in Tokyo.

Mean­while, same-store sales climbed for the 21st con­sec­u­tive month in Au­gust, and the com­pany raised its ful­lyear profit out­look twice.

For the first time since 2012, it’s open­ing more stores in Ja­pan than it’s clos­ing dur­ing a six-month pe­riod. The lo­cal com­pany is the largest over­seas foot­print for Oak Brook, Illi­nois-based McDon­ald’s, with about 2,900 stores in Ja­pan.

“They fo­cused on the foun­da­tions — re­new­ing stores, chang­ing its menu and lis­ten­ing to the voices of moms,” said Sei­ichiro Same­jima, a Tokyo-based an­a­lyst at Ichiyoshi Re­search In­sti­tute. “It wasn’t a sud­den turn­around, but some­thing done step by step.”

What makes the turn­around all the more re­mark­able is that it was driven by one of the few fe­male — and for­eign — chief ex­ec­u­tives in Ja­pan. Be­tween 2004 and 2016, only three women were among the 456 CEOs ap­pointed by Ja­pan’s largest cor­po­ra­tions, ac­cord­ing to a study of 2,500 global pub­lic com­pa­nies by PwC’s Strat­egy&. That’s less than one-tenth of 1 per cent.

Glob­ally, 117 women were among the 3,790 new CEOs dur­ing that pe­riod — a to­tal of 3.1 per cent.

Prime Min­is­ter Shinzo Abe’s gov­ern­ment has pin­pointed the lack of fe­male man­agers as a key economic is­sue as Ja­pan tries to com­pen­sate for a shrink­ing work­force. “You rarely see for­eign fe­males in man­age­rial po­si­tions at Ja­panese cor­po­ra­tions, much less at the helm,” said Kathy Mat­sui, chief Ja­pan strate­gist at Gold­man Sachs Group Inc. “That’s a good sig­nal to Ja­panese so­ci­ety that women can do it, even for­eign women that don’t speak flu­ent Ja­panese.”

The cur­rents were flow­ing against Casanova even be­fore the scan­dals. When she took over McDon­ald’s Ja­pan, the busi­ness was al­ready trou­bled. An­nual rev­enue was in a freefall since 2009, and would con­tinue drop­ping through 2015. Same-store sales were de­clin­ing, and an­nual op­er­at­ing profit hadn’t grown since 2011. “If there’s one thing I’ve learned in all the dif­fer­ent coun­tries I’ve worked in: never pre­sume to know what a cus­tomer wants,” she said at her of­fice in Tokyo.



McDon­ald’s restau­rant in Ike­bukuro, Tokyo

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