Daily Management Review

McDonald's takes up healthy living


McDonalds has decided to get rid of artificial preservatives in meals such as Chicken McNuggets, sausages, omelets, as well as in breakfast sandwiches.

Stephen McKay
Stephen McKay
McDonald's also replaced corn syrup rich in fructose, which is used in muffins, with sucrose. A year ago, the company promised to abandon antibiotics in poultry production because they can seriously harm human health. Then, McDonald's announced its intention to use chicken eggs laid in loose conditions (without cells). 

A few years ago, only a few innovative companies managed to keep up with consumer demand for healthier food, and they had to be content with a limited number of suppliers. However, social networking sites brought healthy living into vogue, and made McDonald's, along with competitors, to make significant changes in its food production.

For quite a long time, McDonald's has been criticized for being slow in reorganizing production of ingredients while smaller companies have already abandoned use of antibiotics in chicken. In favor of McDonald's, we may indicate that the company, with its 14.2 thousand restaurants in the US, will have to rebuild the entire supply chain for implementation of such changes.

McDonald's representatives explained that these changes increase expenditures, but the consumer will still get the desired. The company can compensate rising costs by reducing purchases of other food items and hedging instruments.

McDonald's President in the US Mike Andres said that changes in the supply chain would create some difficulties, but he was pleased with the progress. According to him, the new supply chain will be challenging for farmers.

Similar changes are taking place against the backdrop of slowing sales and stiff competition among fast food chains and supermarkets. Difference between eating at home and eating in fast food peaked over the past decade, which led to high competition and introduction of various promotions from fast food restaurants.

In late July, McDonald's reported a drop in revenue in the II quarter of 2016 by 3.6% due to lower number of fast-food customers, reports Reuters. Basically, number of McDonald's customers in the United States declined.

Comparable sales at US restaurants, which were open at least 13 months ago, have grown in II quarter by 1.8%, while analysts expected an increase of 3.2%.

Net income fell from $ 1.20 billion to $ 1.09 billion, or $ 1.26 to $ 1.25 per share, compared to the same period in 2015. McDonald's total revenue decreased from $ 6.5 billion to $ 6.27 billion.

Meanwhile, McDonald's franchisee express bewilderment, and even irritation with the company’s marketing steps. Recently, McDonald's introduced measures to preserve and increase the flow of guest: "Breakfast all day" and McPick 2 (two dishes of choice for $ 5) led to a slowdown in sales growth by 1.8%.

Franchisees were not initially thrilled with the ongoing marketing activities. Now, the franchised partners are warning that guests bargain for cheaper breakfast menu items for lunch and dinner as breakfast is on sale throughout the day.

"Breakfast all day" is a bad initiative", says one franchisor. "We are losing the customers of usual menu due to cheaper products for breakfast, instead of creating a new clientele." 

Operators also complained that McPick 2 affects their profits: "We had to reduce the prices greatly, but no one asked us if we want to do it, so that traffic will now go up and profits - down".

Experts believe that it is necessary to invest more in production automation to reduce labor costs, and compensate for those customers who prefer cheaper food. 

source: reuters.com, businessinsider.com

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