McDonald's boosts marketing budget by $200 million to drive recovery

McDonald's plans to increase marketing spending for the second half, as the restaurant chain seeks to consolidate a recovery from a sales decline that was likely among the worst in the company's 65-year history. With an additional $200 million to spend on marketing during the second half of the year, McDonald's is likely to be more aggressive with its promotional activity that highlights affordability and value to consumers facing economic uncertainties. The giant joins other major advertisers Coca-Cola and Unilever in recently committing to double marketing investment in the second half after a period in which budgets were mostly put on hold due to the coronavirus pandemic.

These shifts could give a much-needed boost to the advertising industry, which has seen revenue forecasts for the year revised downward due to the health crisis. In the second half, McDonald's will focus on what CEO Kempczinski described as the "three Ps: delivery, express delivery and digital" that have helped sustain sales during the pandemic. In the United States, McDonald's generated nearly 90% of sales through drive-thru, while less than 10% came from delivery as its restaurants were closed.

The company began reopening its U.S. food stores with limited seating, ending the quarter with 2,000 of its roughly 14,000 locations open. McDonald's will permanently close 200 U.S. locations this year, more than half of which are "small-format restaurants" in Walmart stores as part of an ongoing plan. McDonald's plans to increase marketing spending come as the company saw signs of improvement with each month in the second quarter.

AdExchanger reported that total sales were down 39% in April from a year earlier, but the 21% decline in May and 12% decline in June suggest the company is gaining momentum as restaurants reopen around the world. The company began the quarter with about 75% of its restaurants open and ended the period with nearly all of them open. The main challenge is breakfast business, which will continue to decline until more consumers return to commuting to work. McDonald's was one of the major companies that quietly stopped advertising on Facebook without formally participating in a boycott of the social network's policies on removing hate speech, according to an analysis by the media watchdog group.

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