How Does McDonald’s Make Money Partnering With Artistes Like BTS

McDonald’s has caused an international stir over the past few months with their collaboration with the immensely popular BTS K-pop group. The restaurant has partnered with BTS on their third Famous Orders launch to release the BTS meal.

The BTS meal is McDonald’s first international rollout of Famous Orders in over 50 countries. The reception so far has been astounding. News outlets in released countries like Indonesia and Vietnam report an unprecedented sales amount (and chaos) despite the pandemic environment.

With the BTS meal launch in Singapore (currently only via delivery), we will take a deeper look at the origins of Famous Orders and the business model behind it all.

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BTS Meal Is Part Of McDonald’s New Marketing Initiative – Famous Orders

Apart from having iconic in-house mascots, catchy slogan and notable brand design, the restaurant is no stranger to co-branding strategies. The Happy Meal exemplifies McDonald’s marketing skill in leveraging popular brands to increase awareness for certain demographics and improving restaurant sales.

However, the usage of the co-branding strategy had been limited to Happy Meal and was not implemented on other McDonald’s meals. Traditionally, McDonald’s meals sales were boosted through a mix of strategy on releasing new seasonal items and timely meal pricing deals. The only McDonald’s meal that had celebrity branding was the McJordan Meal back in 1992.

Fast forward to February 2020, McDonald’s teased the world with a Super Bowl commercial of celebrities’ orders such as Kanye, Kim Kardashian and the “Big Bad Wolf”. As part of their new growth strategy, the first Famous Orders was launched in September 2020 in the U.S. when McDonald’s announced their collaboration with Travis Scott.

According to The Narrative Group (the agency responsible for the campaign), Famous Orders was rolled out to target Generation Z. With a focus on musical creatives that have an “authentic connection” to the brand, Famous Orders is a resounding success that is now replicated worldwide with BTS.

Behind the campaign success, here are three ways McDonald’s stand to gain from Famous Orders.

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#1 Huge Sales (And Stock) Gains From Celebrity Followings

Not completely immune to the COVID-19 restrictions, McDonald’s had a bad second quarter in 2020 with an 8.7% drop in US sales. However, things turned around in the third quarter on the back of Travis Scott Meal release (and the seasonal release of spicy nuggets sales too). The US sales shot up by 4.6% as McDonald’s faced a US nationwide shortage of Quarter Pounder Burger. Additionally, The Narrative Group shared that every marketing dollar spent on Travis Scott Meal earned the restaurant US$3.22.

This phenomenon flowed over to the stock price as $10 billion was added to McDonald’s market capitalisation in the same period. The stock price rose were driven by investors’ confidence as the restaurant proved to the market their ability to adapt and thrive in the New Normal. Fan demand for the Famous Orders also increased digitalisation uptakes in consumers and drove up delivery orders.

Off the back of McDonald’s worst global sales performance in 15 years due to the pandemic, we can expect global sales to be lifted by the BTS meal demand. In Indonesia, there are already reports of restaurants shutting down due to the overwhelming reception and shortage of meals. In Singapore, we were already warned of the disruption to McDonald’s delivery as the BTS ARMY gets ready to show their support.

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#2 Revenue From Merchandising Collaboration

One of the main ways for fans to show support to their artist apart from buying their albums and concert tickets is merchandising. Unlike Happy Meal collaborations whereby the toys are to be purchased over the counter at a McDonald’s outlet, Famous Orders merchandise is released by the artist companies themselves.

So far, each Famous Order was accompanied by a merchandise release. For Travis Scott Meal, Cactus Jack released items for sale such as T-shirts, hoodies, shorts as well as unusual offerings like a $90 Chicken McNugget body pillow. J Balvin’s merchandise was cancelled due to production challenges. For the BTS meal, BTS ARMY would not be disappointed with the lack of merchandises as HYBE (BTS merchandise company) has already released the product line on their website, with keychains, photocards to bathrobes.

Regardless, McDonald’s has always been secretive on their merchandising model, and it is currently unclear what deal structure is. According to Forbes, Cactus Jack (Travis Scott’s music label) purportedly brought in US$15 million of profits from the co-branded merchandise.

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#3 Strategic Growth For Mcdonald’s Branding Especially With Younger Consumers

In 2020, McDonald’s data showed that most Generation Z has not tried a quarter pounder. The decreasing engagement with the new generation of youth is troubling for McDonald’s which has always been at the forefront of popular culture. With Travis Scott meal, quarter pounder national sales doubled in the first week of release and the campaign grew market penetration into the 18 to 24 years old age group by 3.5%.

The Famous Orders were strategic to partner on musical creatives that can command the attention of Generation Z. The added musical element made it easier for online campaigns such as the famous “Cactus Jack sent me” TikTok slogan to gain virality online.

For the BTS meal, BTS new single “Butter” would be played throughout the campaign. Thus far, the song has broken 5 world records on YouTube and Spotify. Based on BTS 2020 ARMY census, more than half of the ARMY is under the age of 18 with 42% belonging to the age group 18 to 29 years old. With a global base of BTS ARMY in more than 100 countries, BTS will prove to be an invaluable partner for the Famous Orders’ international launch and expand McDonald’s reach to the younger consumers.

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