They say distance makes the heart grow fonder, and after 12 years of being apart, McDonald's (NYSE:MCD) must be feeling some real love toward Disney (NYSE:DIS) after the entertainment giant said it would allow the fast-food chain to once again package its toys in Happy Meal boxes.
It's not only because such toys are popular with kids that McDonald's heart is swelling, but also because for all of the smart business moves it's made over the past few years, stuffing Disney toys in Happy Meals could make moms forget about its decision to remove cheeseburgers and chocolate milk from the children's dinner box.
Disney ended its exclusive relationship with McDonald's in 2006 over concerns about childhood obesity and fast food's role in that development. It adopted nutrition criteria that would only permit the use of its characters on kid-friendly products that met the U.S. government's Dietary Guidelines for Americans. Although the burger king contended it was a mutual decision that ended their 10-year relationship, since it didn't make sense for either party to be tied exclusively to the other, it was still the end of a lucrative pact for the two.
The Los Angeles Times reported at the time it had been a partnership worth around $1 billion to Disney, as McDonald's had paid $100 million in royalties to participate in 11 promotions annually for Disney films, videos, and TV shows.
Six years later, Disney would go even further, implementing new standards for food advertising on programming that targeted kids and families. Any food and beverage product that advertised, sponsored, or promoted something on any Disney portal had to meet Disney's nutrition guidelines.
A difference without distinction?
That's been the status quo since then, but last month McDonald's made the rather momentous announcement that it would be removing cheeseburgers and chocolate milk from Happy Meals as a means of keeping all the meals under 600 calories. While the items would still be available on request, they would no longer appear on the menu.
Together with Healthier Generation, a child nutrition advocacy group, McDonald's promised that in addition to the caloric intake of the meals, by 2022 at least half the Happy Meal meals would get 10% or less of its calories from saturated fat, have 650 milligrams of sodium or less, and would get 10% or less of its calories from sugar.
McDonald's also said it would rework its chocolate milk to reduce the amount of added sugar, but in the meantime would stick to its removal from the menu with it being available upon request only. In its place, bottled water would be listed as a drink option. The menu change is why Disney is once again teaming up with McDonald's, beginning with the June release of Incredibles 2.
The response from parents on the Happy Meal change, however, was immediate and not positive, as McDonald's got dragged on social media for the move. Not only because eliminating the burger was essentially removing the chain's identity, but also because McDonald's said it would take five years to fully implement the change. Some doubted why, if McDonald's was so concerned about health, it would take so long to simply remove the item from the menu.
A turn for the better
McDonald's has finally started seeing guest counts rise again after five straight years of decline and the loss of a half billion customers. It's possible the menu switch could threaten the sustainability of that trend if parents look elsewhere to get their kids a tasty meal at a good price.
To understand how important the Happy Meal is to McDonald's, the market researchers at Sense360 conducted a study in 2016 and found that of the 22 million people who visit McDonald's daily, 3.2 million bought a Happy Meal, or 14.6% of its customers, meaning that $10 million in revenue was generated by the kid's meal every single day.
Yet that's been part of McDonald's problem all along, upsetting the core customer by pursuing initiatives that deviate from the simple truth of good food at a good price. Which is why McDonald's may feel the deal with Disney could help offset the outrage. Still, most kids are simply happy to get any toy with their meal, as evidenced by how well McDonald's has been doing without Disney in the mix. It seems doubtful that an Incredibles 2 or Wreck It Ralph toy would spur even more sales.
Disney and McDonald's might be an item again after 12 years, but the partnership may not be enough to make up for changing what has historically been an exceedingly popular promotion for the burger chain.