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Global Focus Paying Off for McDonald’s, Coke

February 17, 2010 – by Richard Band

Think juggernauts McDonald’s (MCD) and Coke (KO) have already saturated the globe with their brand and can’t get any bigger? Well, think again. With both MCD and KO posting impressive sales in their most recent earnings reports, these companies are proving they have a lot more room to grow.

What’s more, Coke and McDonald’s are doing this in the same way: By giving emerging markets their full attention and treating the U.S. as a low priority.

The numbers speak for themselves. McDonald’s beat expectations with a 2.6% jump in its same-store sales for January — however, a closer look shows that sales fell 0.7% in the U.S., and were offset by a brisk growth rate of 4.3% in Europe, Asia, the Middle East and Africa. Coke’s results mirror this, as North American sales dropped 1% while beverage sales worldwide were up 5% thanks to sharp increases in China, Latin America and India.

Both companies saw great profits as a result of these international sales. Coke’s profit soared 55% in the fourth quarter compared with 2009, and MCD saw Q4 earnings jump 23% year-over-year.

The focus overseas makes sense for both of these truly global brands. After all, McDonald’s has about 14,000 locations in America alone, and Coke is almost literally sold on every corner in the U.S. at gas stations, vending machines and restaurant soda fountains. Company execs know their products have reached a critical mass in the United States and that they have to look overseas if these big-name blue chips want to see substantial growth.

With the rise of China in 2009 as the leading engine of economic growth and the surging middle class in Latin American countries like Brazil, it’s natural for MCD and KO to look to these regions to fuel their sales — even if it means being a little less aggressive on their home turf in the U.S. With massive distribution and marketing operations, it will be simple for McDonald’s and Coke to retake any small share of the domestic market they lose from this focus abroad. And as the numbers show, successful expansion overseas more than offsets the small erosion in North American sales.

As the global economy continues to improve, Coke and McDonald’s will see continued success overseas. And organically, they may even see growth at home in the U.S. too thanks to huge brand loyalty. That adds up to a very bullish outlook for these two iconic American brands.

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