McDonald’s Makes a Big Data Move

The recent McDonald’s acquisition of tech company Dynamic Yield highlights the importance of big data for the foodservice industry. We see three takeaways for the broader food industry: integrating digital into real life, supply chain applications, and the need for collaboration with tech specialists.

Investing in the Future

McDonald's has just announced a USD 300m acquisition of Dynamic Yield, a New York/Tel Aviv-based tech company that specializes in personalization and decision logic technology. To begin with, McDonald's will use this technology to provide a personalized experience in its drive-thru, changing the digital menu boards according to real-time variables such as weather, time of day, length of wait times, and popular items in that location. Even more personalized, the decision technology can instantly suggest additional items you may want to order based on your current selection, or based on past purchasing behaviour – it is the equivalent of the 'other customers also bought…' when you are shopping online.

If you are surprised by the fact that the largest acquisition by McDonald’s since 1999 is a tech company, then you haven’t been paying close attention (or you haven’t been reading our reports – see our October Rabobank to Go).

The effective use of big data has increasingly become a must-have tool for businesses to improve their operations and marketing efforts in a way that drives revenue growth and profitability. Although some companies, such Domino’s Pizza, excel at this, most food companies are running painfully behind.

The acquisition by McDonald’s comes at a time when the company is making large investments in upgrading its locations and including more technology in their operations, adding self-ordering kiosks and digital menu boards and investing in their mobile app. "With this acquisition, we're expanding both our ability to increase the role technology and data will play in our future and the speed with which we'll be able to implement our vision of creating more personalized experiences for our customers," said CEO Steve Easterbrook in a statement.

We highlight three takeaways from this acquisition, relevant to the wider food industry:

1. Using technology to personalize marketing efforts IRL

E-commerce algorithms have shown us what personalized marketing means – using consumers' browsing patterns and purchasing history to suggest other items, or displaying ads that are so personalized, they can sometimes be scary (‘how do they know I wanted that?’). By implementing intelligent menu boards, McDonald's is extending that type of technology into the real world. More and more, data from the digital world will integrate into the physical world. Amazon is experimenting with this in their Amazon Go stores, and it's fairly easy to see that extending into foodservice, improving customer experience to make it faster, more accurate and more modern – something that would be welcome in a context of declining foot traffic.

2. The impact can extend well beyond the point of sale, all the way to the supply chain

As we highlight in our October edition of Rabobank to Go, the applications of data in foodservice can expand well beyond personalized coupons or menu boards. For instance, by better predicting demand, insight can be gained which optimizes kitchen operations for speed and efficiency, as well as the supply chain for the ingredients that are ordered, order cycles, and frequency. In the low-margin business that is foodservice, technology that helps to cut down inventory and waste levels can have a large impact on the bottom line.

3. Gathering data is easy. Knowing how to use it requires specialized skills

The benefits of using big data are vast. Gathering the data is not that hard – most of it is generated just by operating. What is difficult is merging, synthesizing and analyzing all of the data coming from different, often uncoordinated systems, and then building the technological infrastructure that can act upon these insights. This is where most food companies are lost, because frankly, none of them are tech companies. Nor should they be. Acquiring (or at least partnering with) someone who knows how to do this is what makes sense. By purchasing Dynamic Yield, McDonald's can access their technology and gear its development towards their specific needs, but saving them the time (and risk) of trying to develop the technology themselves. We have seen others do similar things (e.g. Walmart buying Jet.com, Yum! Brands acquiring QuickOrder), and we are likely to see a lot more of these moves in the space going forward.

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