Steve Easterbrook, the new CEO of McDonald’s, is firing on all cylinders in his bid to reverse his company’s latest decline in revenues. The fast food giant’s recent announcement that it will stop selling chicken raised with antibiotics that are important for human medicine is both a smart marketing move and an effort to provide safe and healthy food, according to experts. The company said it would implement that policy over the next two years across its 14,000 U.S. restaurants.
Easterbrook, who assumed his new role in January, is credited with turning around the fortunes of McDonald’s in the U.K. over the past several years. He calls himself an “internal activist” and is changing the way his company is perceived, noted Jason Riis, visiting marketing professor at Wharton. “He sees McDonald’s as a modern and progressive burger and breakfast restaurant,” he said. “Modern and progressive are typically two words that are not associated with McDonald’s.”
“When [Easterbrook] calls himself an internal activist, he’s aligned himself with the poultry industry,” added Sherrill Davison, professor of avian medicine and pathology at the University of Pennsylvania School of Veterinary Medicine. “He’s making sure we have a healthy and safe food supply.” Davison is also laboratory director at the Laboratory of Avian Medicine and Pathology at the university’s New Bolton Center.
Riis and Davison discussed the potential impact of McDonald’s move on the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
Many antibiotics used in food-producing animals are not used in human medicine, Davison said, explaining the science behind the move. McDonald’s is focusing on a small percentage of antibiotics that are “medically important or commonly used in human medicines,” she added. Antibiotics could be used both for “growth promotion” or producing fatter birds, and for prevention and treatment of diseases.
“When [Easterbrook] calls himself an internal activist, he’s aligned himself with the poultry industry.”–Sherrill Davison
Food safety advocates have long pointed out that livestock strains become resistant to antibiotics if they are overused. “When these antibiotics are used again and again, some bacteria survive, multiply and spread to threaten people,” noted Jonathan Kaplan in a blog post on the website of the Natural Resources Defense Council, a prominent environmental action group.
Davison pointed out that the U.S. Food and Drug Administration has for the past two years talked of eliminating the growth-promotion use of antibiotics that are medically important or commonly used in human medicines. However, the regulator was comfortable with using those antibiotics for treatment and prevention of diseases.
According to Davison, “McDonalds has taken that extra step” in the direction the FDA would like. The company has said it will avoid chicken raised with those antibiotics used for growth promotion as well as for prevention and treatment of diseases. It would prefer chicken raised with other antibiotics for prevention and treatment. “That is important, because we do have bacterial infections and we do have to treat them for food safety, for the welfare and health of those birds,” she said.
Davison also explained the difference between food companies’ claims of “antibiotic-free chicken” and chicken raised without antibiotics. “Antibiotic-free means there is no antibiotic residue in the product.” She said the poultry industry has worked with companies such as McDonalds over the years to produce safer and healthier food. “The [poultry] industry is proactive to see what it can do better.”
Riis placed all that against the backdrop of McDonald’s revenue declines over the past two quarters. According to Riis, McDonald’s has no option but to change. “The way we eat, and how frequently we eat, has changed over the last 50 years [McDonald’s] has been in business,” he said. “So, they are looking at a new world.”
“The way we eat, and how frequently we eat, has changed over the last 50 years [McDonald’s] has been in business.”–Jason Riis
McDonald’s is also “playing some catch-up” with competitors, as Riis saw it. Other retail food chains like Atlanta, Georgia-based Chick-Fil-A and Denver, Colorado-based Chipotle have had these antibiotics policies for a while, he noted. He added that under Easterbrook, McDonald’s has increased transparency by showing how it prepares its food, simplified its menu and introduced some customization at its outlets. However, he did not expect all of that to work out as desired.
According to Riis, customization “is extremely difficult” to achieve in fast food restaurants. “It’s going to be easier for [Arlington, Virginia-based chain] Five Guys Burgers and Fries and other niche restaurants because they are serving a narrower clientele,” he said. “If the assembly of an item takes too long, it won’t work at a McDonald’s. McDonald’s is still expected to be the fastest and the cheapest; consumers won’t wait as much as they might be willing at another brand’s store.”
Riis pointed to another challenge Easterbrook faces because of the sheer reach and size of his company. “McDonald’s as a mass brand has to keep an awful lot of us happy, and that is just a much harder job.”