On May 8, 1984, just two and a half months before the opening ceremony of the Summer Olympic Games in Los Angeles, the Soviet Union announced its athletes would not be participating out of concern for their safety.
Thirteen other nations followed, most substantively East Germany, Poland, Bulgaria, Cuba and Hungary.
Because of the boycott, seven of the top 10 medal-earning countries from the previous Summer Games would be missing in L.A.
At McDonald’s headquarters in Oak Brook, Ill., the news had everyone's attention — especially those in the accounting department.
As an Olympic sponsor, McDonald's had announced in March that it was bringing back a program it started with the 1976 Olympics called, “When the U.S. wins, you win.”
The fast-food giant handed out pull-off tabs that would reveal an Olympics event. When the U.S. won a medal in that event, Americans won the commensurate prize.
A gold medal meant a free Big Mac, a silver led to a free regular-sized fries, and a bronze yielded a free regular-sized fountain soda.
It worked well in 1976 when the U.S won 34 golds and 94 total medals. But when the Eastern Bloc countries pulled out in 1984, the United States was given a much easier lane in many sports, especially swimming, gymnastics and track and field.
The result?
The U.S. won 83 golds and 174 total medals, a record mark that still stands as a team record today and will likely never be beaten.
With the projections made by McDonald’s based on the previous Summer Games, the results were disastrous.
At least that has been the narrative that has been written for 40 years. Article after article, without a single exception, has covered how McDonald’s got crushed by the communist nation boycott, most of them coming in recent years without a stitch of research.
The real story? It isn’t true.
McDonald's didn't really help fight the narrative. No former executive has ever sought to correct the record, and there are words out there that can easily be twisted — such as the McDonald's spokesperson who told the Los Angeles Times in 1984: "This is the most successful promotion, but it's also the most costly."
But the numbers don't lie.
In order to analyze whether 1984 was in fact a bad year for McDonalds, cllct looked at the gross sales and money made off those sales and the year-over-year percentage increases in the three years prior and after to establish what would have been an expected trajectory.
If the Olympic promotion was indeed a disaster, 1984 would have resulted in a significantly slower sales rate compared to the years before and the years after.
- 1981 – Gross Sales: $2.5B, Profit: $264M
- 1982 – Gross Sales: $2.7B (+8%), Profit: $301M (+14.0%)
- 1983 – Gross Sales: $3.0B (11%), Profit: $343M (+13.9%)
- 1984 – Gross Sales: $3.3B (10%), Profit: $389M (13.4%)
- 1985 – Gross Sales: $3.6B (9%), Profit: $433M (11.3%)
- 1986 – Gross Sales: $4.1B (13.8%), Profit: $480M (10.8%)
By averaging the year-over-year gross sales bump two years before 1984 and two years after, you get an average of 10.4% growth in year-over-year sales. In 1984, McDonald's had a 10% growth in gross sales. Averaging the before and after profit, comes to 12.5% year-over-year cash.
In 1984, McDonald's did almost 1 full percentage point better.
So how could this be? How could they give away so much and still come out in line or even ahead of previous and future tracking?
Well, the U.S. winning certainly drove people into McDonald's more than they would have gone otherwise. And while there are people who would just come in for their free item, odds are strong that once customers walked into the Golden Arches, they wouldn't just get their free Big Mac, fries or soda and walk out.
Then there's the general margin that McDonald's operates under. In truth, only gold medals mattered. The Big Mac cost $1.35 at the time, and the meat had a higher cost than the low-margin fries and soda. The retail price of a regular fries (then 83 cents), was roughly six times more than the restaurant's actual cost. Soda, which was then 67 cents for a regular size, had an even greater margin.
In 1984, McDonald's Play Places were also rocking. Parents would take kids to play on the playground's slides and with the toys just as if they were at a regular park. What that means is that if you went to McDonald's in the mid '80s, there was a chance that Mickey D's got you for two bites of the apple. Just like a Starbucks today, where people order coffee as they work for hours. Having kids around for a longer time increases the chances that the first free soda becomes a second paid soda or a meal.
The McDonald's story of being unlucky from the boycott seemingly writes itself. And it did, without any checking of available financial reports. The narrative was even repeated on an episode of "The Simpsons."
If you're looking for an Olympics marketing campaign gone financially wrong, look no further than what happened eight years later, when Reebok's "Dan and Dave" campaign hit a snag when Dan O'Brien failed to make the Olympics. Unlike McDonald's in 1984, the $20 million Reebok spent on the campaign did have an impact on the bottom line, earnings and stock price.
Darren Rovell is the founder of cllct.com and one of the country's leading reporters on the collectible market. He previously worked for ESPN, CNBC and The Action Network.