McDonald’s Healthy Meal: Will Diners Bite It?
Wharton’s Jason Riis and Penn Vet’s Sherrill Davison discuss McDonald’s new policy on food ingredients.
Americans are becoming more health conscious, choosing food that is organic, packed with antioxidants and free of preservatives and antibiotics. So it is small wonder that McDonald’s, a global fast food juggernaut known for less-than-nutritious food, has seen sales stagnate.
But the company recently decided to join the health-conscious bandwagon: This month, McDonald’s said it has completed a commitment to phase out the use of chicken raised with antibiotics used in human medicine at its U.S. restaurants. It also plans to remove artificial preservatives from popular items such as McNuggets and McGriddles. Sandwich buns will no longer contain high fructose corn syrup.
But will diners buy – and bite – it? Jason Riis, a Wharton marketing lecturer, and Sherrill Davison, associate professor of avian medicine and pathology at the University of Pennsylvania’s School of Veterinary Medicine, discuss McDonald’s latest strategy on the [email protected] Show that airs on Channel 111 on SiriusXM.
An edited transcript of the conversation follows.
[email protected]: From a marketing perspective, how much of an impact do you think these changes are going to have? The sales numbers are still not what McDonald’s would like to see at this point.
Jason Riis: There are some encouraging signs for McDonald’s. Sales are down, or at least sales growth is down in the restaurant industry, generally. There are a number of other threats including minimum wage [increases], which is hitting them harder than supermarkets, for example. But this is the kind of thing that they have to do. The president for McDonald’s USA said Americans are now more concerned about where their food comes from than they have ever been. That’s what this is a response to.
[email protected]: The company has a global perspective. But seemingly the idea is that they need to focus on this issue more in the United States than overseas.
Riis: Yes, something like 40% of their profit comes from the U.S. market, so trends that are of a concern here are absolutely central to the company.
[email protected]: A lot of Americans eat chicken because they see it as a healthier option than a burger or a steak. Yet McDonald’s has had a bad reputation for a long time where chicken is concerned. How much of an impact do you see these changes having, Sherrill?
Sherrill Davison: We’re not quite sure exactly what the impact is going to be because we do know that the consumer wants products where the poultry is raised without antibiotics. But all poultry that end up on your plate is antibiotic-free. What we’re talking about is they’re not using antibiotics during the life of that bird versus some companies that use antibiotics if they have a disease problem. The key here is that a veterinarian is involved with the appropriate use of those antibiotics.
“We’re seeing many more companies not using antibiotics than we had seen in past years.”–Sherrill Davison
We’re in a transition phase right now to see how this is all going to affect the market. The FDA has put a directive out [to phase out antibiotic use for animal production taking effect on] Jan. 1, 2017. That puts the veterinarian at the forefront of making sure the antibiotics are given appropriately, that we’re not using those growth-promoting antibiotics — those low-level antibiotics — and they’re used appropriately for treatment of those birds.
[email protected]: There are types of antibiotics that may still be used in this process, so which ones are being taken out?
Davison: The ones that are used in human medicine are the ones being taken out. The other ones that are not related to human medicine are still under the direction or are going to be under the direction of a veterinarian. We’re going to be writing prescriptions, we’re going to be writing directives for feed — inclusion of antibiotics in the feed. The key here is that at the end of the day, there are no antibiotics in your food that’s on the table.
[email protected]: How much does that realistically change the industry going forward?
Davison: It has already changed the industry. It’s changed the profile of the industry. We’re seeing many more companies not using antibiotics than we had seen in past years. They do have to change their management on the farm to make sure that [the animcals] don’t get bacterial infections. It’s really a preventive medicine-type of situation so they don’t get diseases.
[email protected]: From a marketing perspective, any time companies start to mention antibiotic-free, you know they’re trying to take a path down a business angle. Those are terms that draw the attention of the consumer.
Riis: That’s right. For McDonald’s, this is largely a move about health perceptions rather than a move about health, per se. Health perceptions have been changing for some time. A number of chains like [Mexican fast casual chain] Chipotle have tried to position themselves around a certain type of health perception. For them, that ended up backfiring. Let’s see how McDonald’s does with it.
[email protected]: The E. coli outbreak linked to Chipotle probably shows that no company can be totally protected from having something happen to them, especially when you’re talking about locally sourced food.
Riis: That’s always going to be a risk. There are always going to be safety issues in food. And professionals in the industry led by people like Sherrill know how to protect us from that. But consumers’ perceptions of those processes are very different from the nuanced reality Sherrill is describing.
“All poultry that end up on your plate is antibiotic-free. What we’re talking about is they’re not using antibiotics during the life of that bird.”–Sherrill Davison
[email protected]: Is that a fair statement? What happened at Chipotle could just as easily happen in the next several months to a McDonald’s or a TGI Friday’s.
Davison: That’s correct, and that’s where the veterinarian comes in. You just talked about local sourcing. That’s one area I do have a concern about with some of these smaller flocks where they don’t have veterinary input. I’m urging those folks … to [develop] a relationship with a veterinarian so we can make sure they have safe food.
[email protected]: How many farms like that are out there?
Davison: We don’t know the numbers, but we know that they’re growing.
[email protected]: One article I read said McDonald’s is trying to become a premium, fast casual chain. Is that something that’s possible?
Riis: It’ll be a slow play, but it’s a direction that they feel they need to go, and it’s certainly a direction that they can go. The biggest place where fast casual plays out is in the interiors of the restaurants. Do they look and feel more comfortable? Are they a place where you would like to sit with a coffee and work on your computer and have it not just be a place where there are kids running around eating their chicken nuggets and french fries? They have made some efforts to create interiors that look and feel like that.
The second [facet of fast casual revolves] around perceptions of food quality and moving in the direction that Chipotle went