‘M’ goes off the menu at McDonald’s
The golden arches, the most striking symbol of the McDonald’s brand, have gone missing from its products in a few markets. For about a week now, most of the fast-food chain’s restaurants in the National Capital Region have been selling burgers, beverages, wraps, and nuggets without the signature ‘M’ on their wrappers (your final bill would have it though).
There are product outages with unfailing regularity. Outlets in vantage locations, such as the one near ITO Metro station in central Delhi, have “sold out” labels permanently stuck on their soft serve menus; sometimes hot beverages are unavailable because of “supplier issues with milk”, though you might be able to grab a cold coffee because it comes pre-mixed.
Vikram Bakshi, who was reinstated earlier this year as managing director (MD) of Connaught Plaza Restaurants Pvt Ltd (CPRL)— the 23-year-old 50:50 joint venture (JV) between him and McDonald’s India Pvt Ltd (MIPL), says, “Our packaging suppliers have been sent notices by McDonald’s Corporation to desist from supplying us material with its branding. As they are small players they have stopped supplying to us. That is why in some cases we are offering burgers, fries and wraps in plain packaging (without the ‘M’ logo). However, the stores are still using the McDonald’s name and the product is exactly the same.” This follows an August 2017 move by McDonald’s India terminating its franchise agreement with CPRL. According to the termination notice, Bakshi would be stopped from using the McDonald’s brand name, trademarks, designs, branding, operational and marketing practice and policies and food recipes and specifications from September 6. While McDonald’s said in the notice “we will continue to take steps to exercise our legal and contractual rights and enforce the termination”, Bakshi said it would be business as usual till the termination is discussed in a CPRL board meeting. A month earlier, the National Company Law Tribunal (NCLT) in Delhi had ordered Bakshi’s reinstatement as MD of CPRL.
CPRL, the master franchisee for MIPL in North and East India, runs 169 outlets for McDonald’s India, and is in the throes of a bitter battle between partners Bakshi and the fast-food chain ever since the former was unceremoniously ousted as MD of CPRL in August 2013. McDonald’s accused Bakshi of financial bungling at CPRL and not devoting enough time to it; Bakshi denied any wrongdoing. As the bickering intensified, Bakshi approached the Company Law Board (CLB) against his dismissal while McDonald’s went to the London Court of International Arbitration.
For a week now, McDonald’s outlets in NCR have been selling burgers and beverages without the signature ‘M’ on their wrappers
In early 2014, Bakshi offered to buy McDonald’s stake in the JV at a net asset value of ~150 crore. The US firm made a counter offer: ~48-50 crore for Bakshi’s stake. The latter then insisted on a fair market value and offered to sell his stake first at ~2,500 crore and then for ~1,800 crore. The two bickering partners couldn’t reach an agreement.
The sparring has resulted in the McDonald’s ecosystem in the North and Eastern parts of country slipping into a marketing coma. Observers have pointed out how the firm’s expansion plans have come to a grinding halt, it has faced a steady employee exodus and a drop in market share. Its supply chain and quality control have also become wayward as profitability has slid sharply. How will this affect the brand? Siddharth Shekhar Singh, associate professor of marketing at the Indian School of Business (ISB), said: “McDonald’s has every right to protect its intellectual property and the issue looks far from being over.” He added, whichever way the issue gets resolved “McDonald’s will have to come back with a campaign explaining the issues to consumers and assuring that the quality is the same after all, and there has been no compromise on the product.”
Alchemist Consulting MD Samit Sinha said, “If your overall experience and expectations from the brand are not met, the brand equity will definitely suffer. But because the problems are geographically limited, McDonald’s Corp is surely hoping that it will be able to contain the damage. So if you look at the overall scheme of things, this is a minor hiccup for the brand and it will bounce back because of global momentum.”