McDonald’s Breakfast Launch Dilemma

“We provide food that customers love, day after day after day. People just want more of it”.
(Ray Kroc)

It was mid-July 2011 when Jamil Husain (marketing manager), Atif Abbas, and Ali Raza (Marketing
executives) were sitting in the meeting room of Lakson Square building, Karachi, to discuss the fate of
McDonald’s breakfast menu. It was Jamil’s idea to launch the breakfast menu in the Pakistani market.
He, however, was unable to convince his team members, who thought that the market was not ready
to accept the breakfast option since there was a huge difference between the Pakistani lifestyle and
the western lifestyle. Jamil presented his arguments before them, but all in vain. Somehow, he knew
that the same arguments, if presented in front of the top management, would lead to a “No” situation.
Just then, the phone rang; it was Caroline, the company secretary, confirming the meeting venue, which
was supposed to take place in two days.

Background

McDonald’s, a company known for its hamburgers, was founded by two brothers, Richard, and Maurice
McDonalds, in San Bernardino, California, in 19481, which the franchise agent later bought Ray Kroc
in 1955. McDonalds was present at more than 33,000 locations worldwide.

In Pakistan, food was a source of entertainment. This could partly be attributed to the fact that there
weren’t many entertainment options available and partly due to the Pakistanis’ love for good
food. McDonald’s brought the branded “fast” food concept to Pakistan. The fast-food concept was not
very prevalent[1] in this South Asian market of 180 million people. However, media proliferation, and
the positive word of mouth of people, who had consumed McDonald's’ on their foreign tours, created
the hype. No wonder one could see throngs of people gathering at McDonald’s when its first outlet
opened in September 1998 in Lahore. The Karachi outlet was opened a week after Lahore’s opening.
In 2011, 23 outlets were operating in Pakistan (for details about the outlets, please refer to exhibit 10).

Consumer Behavior

The eating habit of Pakistani consumers varied due to numerous reasons. According to research
conducted by Gallup Pakistan’s research, 55% of Pakistanis ate meals three times a day. 37% had two
meals, 5% had one meal, and 5% ate meals more than thrice in a day2. Breakfast items usually
consumed were Paratha3, Bread, tea4, etc. (Please refer to Table 1).

Table 1 - Breakfast Items Consumed by Pakistanis

2006 2008 2009
Paratha 45% 41% 49%
Bread 10% 11% 10%
Tea 11% 13% 9%
Rusk - - 7%
Roti with Curry 34% 33% 18%
Nothing - - 2%
Others - 1% -
Source: Gallup and Gillani, 30 years of Polling data on eating habits of Pakistanis

 
1
 http://en.wikipedia.org/wiki/McDonald%27 
2
 30 years of polling on eating habits of Pakistanis 1980‐2010, a Gallup Pakistan report 
3
 Traditional flat bread 
4
 94% of the people consume tea while 2% consume coffee (Gallup and Gilani /National survey 2009) 
 The products consumed varied with the socio-economic group (please see Exhibit 1 for the socio-
economic classification)

Table 2 – Income wise Consumption

Breakfast Items Class wise Consumption

Tea All classes5
Roti/Bread/ Paratha All classes
Egg SEC A and B and (C not regularly)
Cereal (cornflakes, porridge, etc.) SEC A (B and C not regularly)
Cheese SEC A (B and C not regularly)
Frozen food (Nuggets, croquet, patties) SEC A and B

Table 3 - Average meat consumption in a household per month

Chicken Beef Mutton

All Pakistan 4 Kg 4 Kg 3 Kg
Punjab 4Kg 3Kg 3Kg
Sindh 4Kg 4Kg 3Kg
Khyber Pakhtunkhwa 7Kg 9Kg 6Kg
Baluchistan 3Kg 3Kg 7Kg
Source: Gallup and Gillani, 30 years of polling data on eating habits of Pakistanis

Labor class living away from home relied on the roadside dhabas6 for their meals. The regular breakfast
menu of lower-class laborers usually involved paratha and tea (Table 2 given above summarizes the
breakfast menu, which was consumed daily by various classes). The breakfast menu for the traditional
Pakistani consisted of rich and oily foods, preferably the Halva Puri. It had two separate dishes, one of
halva (a sweet made from semolina) and the other of Aloo Cholay (a spicy chickpea and potato curry)
eaten with puri - a small, round deep, fried flatbread. The last course of breakfast was usually Chai7.
This was usually accompanied by Lassi8, which was made from yogurt and, depending on the drinker’s
taste, could be either salty or sweet. The sweet option was often topped with malai9. This type of
breakfast was preferred on weekends by all classes (upper- lower class) (refer to exhibit 2 for the
weekend preference for breakfast). Per person cost for the entire menu (which consisted of puri, halwa,
and curry) ranged from Rs. 15-30 depending on the location10. The type of breakfast consumed had
also been impacted by:

a) The increased number of females entering the workforce had led to the increased consumption of
ready-to-cook meals, ready-to-eat meals, and frozen foods in urban areas.

 
5
  Indicated  by  a  U&A  study  conducted  and  according  to  Gallup’s  30  year  of  eating  habits  polling  data:  90% 
consumers consume tea during breakfast. 
6
 Small roadside restaurants offering food at cheap rates. 
7
 Chai is the Urdu word for tea. 
8
 Yogurt based milk shake. 
9
 Cream produced from sifting unprocessed milk. 
10
 The posh locations charged higher prices for the traditional menu as compared to the middle‐class locality. 
 The working and the non-working female could be classified based on their income group and
lifestyle in the following manner:

SEC A and B 

Working      Non‐Working 

Not  an  active 

Active  social  life;  social  life;  prefers  Active  social  life;  prefer 
Not an active social 
prefer  eating  out  to  stay  at  home.  eating out (frequency would 
life;  prefer  to  stay 
(frequency  would  Prefers  vary with income class).
at  home  after 
vary  with  income  h d f d
class). 

b) Increased health consciousness due to media proliferation11 and as evidenced by the increased
number of gyms and health clubs in both posh and regular localities, was an indication that health
consciousness was rising.
c) Food preferences also depended on geographical locations. People living in the Punjab province
(Northern Region) were famous for their excessive love for food. They were very forthcoming when
it came to trying out new products. They usually preferred a milder taste in food. People in Sindh
province (Southern region) preferred spicy food.
d) The lifestyle of the business community and numerous households, specifically in the urban areas,
was that they usually slept late at night and woke up late or, in some cases, just a few minutes
before leaving for work.

Table 4 – Eating Habits

2003 2006 2008

Heavy Lunch 25% 19% 18%
Heavy Dinner 16% 23% 19%
Both meals heavy 32% 34% 18%
Both meals Light 26% 24% 44%
No response 1% 1%
Source: Gallup and Gillani, 30 years of polling data on eating habits of Pakistanis

McDonald’s Consumer Profile

McDonald’s catered to the urban population of Pakistan. However, McDonald’s penetration was mainly
driven by the income group AB. SEC C was also among the target group.

 
11
 Media/proliferation had an important role to play in educating the consumers about healthy eating and a 
balanced diet. Cooking channels had emerged and there were numerous cooking programs that were educating 
the consumers about the benefit of a healthy diet. 
The top three segments of McDonald’s customer categorization:
1. The teens (15-25 years)
2. Young adults (20-34 years) and
3. Families with kids (FWKS - 30-49 years old, married with kids)

McDonald’s developed its loyalty measurements based on the research conducted:

McDonald’s most often

Behavior Loyal: People
using McDonald’s most
often but prefer another
Quick Service Restaurant
(QSR)
Competitive Loyal:
People using another QSR
most often and prefer
another one too.
(Think Positive)
Source: Interview with the Marketing Manager
True Loyal: People using
McDonald’s most often
and whose favorite QSR
restaurant is McDonald’s
too.
Attitude Loyal: people
using another QSR most
often and whose favorite is
McDonald’s.
McDonald’s preferred

39% of the McDonald’s users were true loyals, 24% attitudinal loyals, 26% behavioral loyals, and 49%
competitive loyals (Source: Interview with the Marketing Manager; Base: All McDonald’s users)

Competition

Acknowledging the trend of having traditional tea Paratha or Halwa Puri for breakfast, the industry was
dominated by the presence of local roadside dhabas and hotels that offered the serving. Not only was
the serving cheap, but it also satisfied individuals’ hunger. On average, a breakfast of tea Paratha would
cost Rs. 30 per person (Please refer to Exhibit 11). Most of these dhabas were run by people of the
nearby locality on a subsistence level. Bakeries were yet another key player in the industry. The variety
in terms of baked food items that they offered, along with hygiene and economical prices, made them
a viable option for consumers. These bakeries ranged from small corner stores to large spread-out
businesses, e.g., Gourmet Bakers in Punjab. The emergence of cafes and restaurants (both local and
foreign) in the last decade had made the food industry very competitive. For some, offering the
breakfast menu worked as a differentiation point. For others, it was simply capitalizing on the untapped
potential to make some extra money. Few of the restaurants/cafes served breakfast on a daily basis.
The bulk of the outlets offered brunch on Sundays. Knowing that the market at present had a small
following of people having breakfast outside, these restaurants and cafes usually charged premium
prices (refer to exhibit 14 in the appendix) to maximize profits. These restaurants offered both traditional
and western cuisine to cater to a larger audience of food lovers. Some of the famous cafés were
Ireland’s Butlers Chocolate Café, which was opened in Karachi in Dec 2009, on main Zamzama
Boulevard (Posh locality of Karachi). They offered breakfast, shakes, truffles, and chocolates.
Espresso, launched in 2004, offered a menu packed with mouth-watering appetizers, a selection of
sandwiches, wraps, pasta, paninis, and divine desserts. A sizeable range of teas, smoothies, hot &
cold beverages, and an array of coffees, all created from the finest imported and local ingredients, were
available at the café. Other players, such as Dunkin Donuts, had a breakfast menu ranging from
croissants, pizza, sandwiches, and coffee.
McDonald’s in India

McDonald’s launched its breakfast menu in 2009. The launch purpose was to capture the market which
had no real branded option to compete with. According to an expert analysis, 60% of the young Indians
in Mumbai and other metropolis had at least one breakfast outside the house in a week – be it at the
roadside vendor, the office, or the station. McDonald’s breakfast was aimed to serve as the next best
substitute to Idlis, Dosas & Vada pavs. Keeping the masses in mind, they proposed a menu that was
affordable and had a traditional essence to it. The communication for the menu highlighted the
importance of convenience and on-the-go breakfast options. The campaign was launched after 6
months of initial test marketing in key cities of India, followed by a complete promotion drive throughout
the country. Listed below are the items served on the breakfast menu and their prices (in Indian rupees).

Table 612:

Item Price (Indian

Rupees)
Idli McMuffin Rs 35
Steamed Vegetarian McMuffin Rs 35
Paneer And Corn McMuffin Rs 40
Sausage McMuffin Rs 45
Sausage McMuffin with Egg Rs 55
Steamed Cuppa Corn Rs 20
Crisp Hash Brown Rs 20
Hot Cakes With Maple Syrup & Rs 55
Butter Print 
‘Big Breakfast’ platters Rs 99 Ad i

McDonald’s in Malaysia
In contrast to both Pakistan & India, Malaysia was a metropolitan country. McDonald’s realized the
potential in the economy and decided to invest in the breakfast sector. The first-mover advantage
worked in their favor, and they were able to seize a sizeable share of the market. They used a two-
pronged communication approach targeting both adults and families simultaneously. They offered on-
the-go weekday meals for the working class, whereas, on the other hand, they served weekend
breakfast baskets to families with kids, especially those aged between 5 to 15 years.
Recent times have seen the emergence of local cafes & international food chains, giving stiff
competition to its market dominance. The food giant, however, had maintained its share and was
expected to grow by more than 20% at the end of 2011.

 
12
 http://www.mcdonaldsindia.com/breakfast‐menu.html 
Table 713 - Breakfast Menu in Malaysia

WEEKDAY MENU DEALS

Price (RM)
Sausage McMuffin with egg + RM 4.5
Coffee/Tea
Sausage McMuffin + Coffee/Tea RM
4.00
Egg McMuffin with Chicken Roll+ RM 4.5
Coffee/Tea
2Pcs Hotcakes+ Coffee/Tea RM4.5
Chicken Muffin + Coffee/Tea RM4.5

Table 8 – Breakfast Menu in Malaysia

Weekend Menu Deals (FAMILY BREAKFAST BOX)

BIG BREAKFAST: English muffin (with scrambled eggs and sausage or grape
jam), chicken sausages, hash browns, hot cakes, coffee
a) 1 big breakfast with hash browns RM 24.90
b) 1 sausage McMuffin with egg/1 egg McMuffin with Chicken
Roll
c) 2pcs Hotcakes
d) 2pcs Hash browns
e) 3 coffee/ tea
a) 1 big breakfast with 1 pc hash browns RM 19.90
b)1 sausage McMuffin with egg
c) 2pcs hot cakes
d) 1 pc hash brown
e) 2 coffee/ tea

Moving Forward

While Jamil reviewed the success stories of various markets and prepared his presentation, he thought
about the points that would help him convince his top management about this difficult yet exciting
launch. Somehow, he knew that the presentation would be an uphill task.

 
13
 http://www.mcdonalds.com.my/ourfood/menu_items.asp 
 Exhibit 1- Socio-Economic Classification

Source: http://www.docstoc.com/docs/69777869/Annexes 
Exhibit 2 – Breakfast Consumption in Pakistan

2 (a) Eating out in a restaurant at least once per month

2 (b) Consuming special breakfast on weekends

Source: Gallup and Gillani, 30 years of polling data on eating habits of Pakistanis
 Exhibit 3- Demographic Data
Source: Interview with the Marketing Manager

SEC SEC % Population in #

A1 4%
1,1,795
A2 5%
1,361,818
B 12%
3,257,682
C 21%
5,660,889
D 22%
5,901,210
E1 15%
4,058,751
E2 20%
5,367,164

Exhibit 4: Source: Interview with the Marketing Manager

 Exhibit 5 – McDonald’s Demographic Penetration
Disclaimer: Figures have been disguised to maintain the company’s privacy.

   Year 2010(Pakistan)
McDonald’s Penetration (Age wise)   
Teens  45%
Young Adults  57%
30+Singles  39%
FWKS  44%
FWOKS  39%
     
McDonald’s Penetration (SEC wise)   
SEC AB  49%
SEC C1  47%
SEC C2  43%
     
Profile of McDonald’s (Age wise) (McDonald’s Users interviewed)
Teens  28%
Young Adults  36%
30+Singles  7%
FWKS  50%
FWOKS  22%
     
Profile of McDonald’s (SEC wise) (McDonald’s Users interviewed)
SEC AB  48%
SEC C1  46%
SEC C2  37%
     
Profile of McDonald’s Visit (Age wise) (McDonald’s Users interviewed)
Teens  26%
Young Adults  36%
30+Singles  5%
FWKS  49%
FWOKS  21%
     
Profile of McDonald’s Visit (SEC wise) (McDonald’s Users interviewed)
SEC AB  44%
SEC C1  43%
SEC C2  30%
Exhibit 10 - Details of McDonald’s outlets (Source: Interview with the Marketing Manager
City Location 24 Hours Dine-in Birthday Parties 24 Hours’ Drive-
& Take Away Thru
Lahore Railways Kiosk &
MDS
Jail Road 
Fortress Stadium 
Park Lane Tower 
Main Gulberg  
Ali Towers 
Allama Iqbal Town 
Model Town 
Defence-I 
Defence-III  
Karachi Air Port   
Dolmen Mall 
Hyderi
Stadium Road 
Dolmen Mall Tariq 
Road
Lakson Square 
Najeeb Center  
Park Towers 
Corniche  
Hyderabad Autobhan  
Faisalabad Sityana Road  
Sialkot Clover Plaza 
Rawalpindi Jinnah Park 
Islamabad McDonalds F-9 
Park

Exhibit 11- Price List of Traditional Breakfast

Item  Price (in rupees)
Chai  15 
Doodhpati  20 
Paratha  10 
Anda (fried  15 
egg) 
Puri  12 
Halwa  20 per plate
Channa/Aalo  30 per plate
 Exhibit 12 - Proposed Breakfast Menu

Price
PRODUCT
Re

Egg McMuffin 140

Sausage with Egg 150
Sausage McMuffin 130
Big Break Fast 375
Hash Brown 50
Hot Cakes 225

Coffee Cappuccino 100

Hot Tea 50

Exhibit 13- Big Breakfast Option

Muffin 1
Chicken sausage 1
Hash Brown 1
Scrambled Eggs 2
Jam Portion 1
Exhibit 14 - Competition