He thought that:
- McDonalds is a tougher business
- Does not win taste test
- Gone into price promotional instead of selling its products
- Feel better about Gillette
- Not as good as a business as Coke
So how did McDonalds vs Coke do in last 15 years ?
McDonalds continues to be a terrific business. It is fashionable to talk bad about its food but whenever I go there it is super busy. Now they are automating and lowering their costs.
When was that lecture given?
Mason Hawkins was involved in it. There’s an interesting value investor.
His Longleaf Parners fund is now trailing the S&P500 since inception on 4/8/87.
Partners Fund | Longleaf Partners Funds | Southeastern Asset Management
But don’t worry, Mr. Hawkins and co have done very well out of it.
It’s worth noting that McDonald’s has been following the Burger King playbook (RBI) selling corporate stores in favor of franchise fees. That makes them asset light and shows a higher ROI.
They are down to 7% of (US) stores being company owned, and have been shedding them for at least a decade. This is a trick you can only play once - even if over an extended period - and then you live with the results (which, in fairness, may also be quite good.)
Coke did this in the early days giving away the bottling rights around the country, and getting rid of the icky problem of trucks and warehouses and drivers dealing with supermarkets, (and capital) etc. FWIW, Coke bought back it’s largest North American bottler about a decade ago, if memory serves. Don’t remember why, exactly, just interesting that they reversed strategies all these years later.
The lowering of costs via automation or new equipment or processes, obviously, is borne by the franchisee, and only slightly by McDonald’s corporate.