McDonald's fresh beef Quarter Pounder really is a big deal | MCD Message Board Posts

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Msg  32 of 45  at  3/10/2018 12:24:05 PM  by

jerrykrause


McDonald's fresh beef Quarter Pounder really is a big deal

 
 

McDonald's fresh beef Quarter Pounder really is a big deal

JOE CAHILL ON BUSINESS
 

Of all the changes Steve Easterbrook has pushed through in three years as McDonald's CEO, fresh beef is the most transformative. Fresh beef isn't likely to produce the quick sales surge McDonald's got from all-day breakfast a couple of years ago, but its long-term implications are far greater. The switch from frozen patties to fresh-cooked burgers could fundamentally change McDonald's brand image and dramatically expand its customer base.

For generations, McDonald's has been known for fast, cheap, convenient food that tastes OK and isn't particularly good for you. That marketing proposition worked just fine until people started thinking harder about the stuff they put in their stomachs. McDonald's largely ignored the trend toward healthier eating, creating an opening for rivals. As consumers migrated to Culver's, Five Guys, Smashburger and other chains offering never-frozen beef, McDonald's lost some 500 million customer visits between 2012 and 2017.

Easterbrook has been chipping away at McDonald's image problem among health-conscious consumers, taking preservatives out of some products and adding fresh ingredients to others. But as a burger chain, McDonald's always will be defined by perceptions of its beef. And these days, frozen patties send a message of mediocrity.

Now Easterbrook is taking dead aim at that perception. On March 5, the Oak Brook-based company announced that by May 14,000 outlets in the continental U.S. would be serving Quarter Pounders made from never-frozen beef. "At the end of the day, McDonald's is a burger company," McDonald's USA President Chris Kempczinski told reporters. "And for us there's no more important place for us to focus on improving the quality of our food."

The nationwide rollout follows a successful test run in 400 Texas and Oklahoma restaurants. Linda VanGosen, McDonald's vice president of menu innovation, said the test showed fresh beef does more than boost burger sales. "We were able to change perception not just around our burgers, but also around our brand," she said.

A similar marketing metamorphosis across the U.S. would help McDonald's recapture ground lost to rivals in recent years. Morningstar analyst R.J. Hottovy says fresh beef could "attract new or lapsed customers" to McDonald's. He also notes it could thwart rivals from converting them: "It's been a cornerstone of competitors' marketing that they have fresh beef and McDonald's doesn't."

Closing the perceived health-and-quality gap makes McDonald's inherent advantages more decisive in the marketplace. By far the largest burger chain, McDonald's has a huge edge over rivals when it comes to convenience. Recently, many consumers have been passing by McDonald's locations on their way to a competitor offering fresh-cooked beef. Now McDonald's is eliminating the need to drive so far for a better burger.

A couple of caveats. First of all, McDonald's can't stop with Quarter Pounders. To demonstrate a true commitment to quality, it will have to eradicate frozen beef from the menu. Families seeking fresh food won't come to McDonald's if the kids' Happy Meal burger is flash-frozen.

Execution is another crucial element. McDonald's supply chain is about to get more complicated, as will restaurant operations. If service slows significantly, McDonald's will have a problem. Noting that fresh beef cooks faster than frozen patties, spokeswoman Andrea Abate says test-market results indicate it can be served up with the speed customers expect.

Price matters, too. McDonald's just reversed store traffic declines by playing to its traditional strength as a discounter. But the move to fresh beef will increase costs for McDonald's franchisees already paying more for labor and other inputs. Restaurant owners will push back if pricing doesn't reflect the costs of handling and cooking beef.

Abate says McDonald's expects "no meaningful impact on price." That's critical, because a big price hike could alienate McDonald's core low- to middle-income customers—who don't have money to burn. At the right price, fresh beef will appeal to those customers while changing others' minds about McDonald's.




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