In what can only be described as a masterstroke of public relations, McDonald's (MCD) has laid out a brilliant plan to neutralize its critics and simultaneously keep the risks to its business at an absolute minimum. Investors, stand up and applaud: This is Don Thompson's finest hour as CEO.
Recapping what McDonald's announced late Thursday, the company will:
- Allow customers to get a side salad, fruit or vegetable instead of fries with value meals.
- Promote water, milk and juice as the drinks for Happy Meals on its menus and in ads (this doesn't mean you aren't allowed to buy a Coke for junior if you choose).
- Use Happy Meal and other packaging "to generate excitement for fruit, vegetable, low/reduced-fat dairy, or water options for kids." Messaging on Happy Meal bags and boxes will extol smart nutrition and good health for children, and ads aimed at young people will do the same.
All this will come to pass in McDonald's 20 biggest markets, which make up about 85% of its sales. Here's the neat thing, though — McDonald's already sells water, salads, milk and apple slices. But now it's going to ostensibly make it easier to purchase these items with a meal, along with serving up a few regional alternatives.
Does difficult menu navigation explain why no one buys this stuff now? Not likely. It's fair to say millions of diners aren't completely flummoxed as to why they mysteriously find themselves walking out the door with fries in their bag instead of kale. There are plenty of places to get a salad, after all, and McDonald’s is probably not going to be the first place that comes to mind when you're craving good greens.
Previously, efforts at forced healthy eating haven't resonated at the House of Ronald, but that hasn't stopped it from trying. From The Wall Street Journal: "Before McDonald's automatically included apple slices in its Happy Meals, it had offered them for many years as a substitute for fries, but parents rarely chose them. When McDonald's tested a Happy Meal version that didn't contain fries, it didn't go over well."
Of course, we may be in a new era, seeing as how you can't go a day without reading something about the evils of fast food. However, here's another neat thing — these changes aren't even happening immediately. According to McDonald's, the plan will be rolled out to 30% to 50% of the markets that are affected within three years of the announcement, and in every one of the markets by 2020.
This is 2013. It doesn’t take McDonald's six-plus years to do a bit of menu retooling and tell kids milk is better for their bones than soda. Sure, it takes time to get new marketing copy written and food supplied to stores, but it's only going to require more than half a decade to get carrots to the Austrians if McDonald's wants it to.
Now, there's absolutely nothing wrong with children or adults eating well. Over the years, McDonald's has listened to some of the (many times well-meaning) concerns, getting nicer to the animals it feeds us and serving us greens. It's put items billed as healthier on the menu more than once, things such as egg whites and grilled chicken. This is all fine.
That said, if you think this is what McDonald's is about, check out the menu section of its website and look at what's listed first. Even better, sit near a store counter at lunchtime and listen to what people actually order.
For years, McDonald's has been assailed by its haters with accusations of cackling away with billions in profits while making kids fat, giving everyone diabetes and destroying forests. But it's always found a way to thrive as a business regardless, one whose stock price has quadrupled in the past decade, about five times the advance in the stock market overall. All that's happened since the highly critical "Super Size Me" came out in 2004 is that McDonald's systemwide sales have gone from $51.3 billion that year to $88.3 billion in 2012. (Editor's note: the film's maker, Morgan Spurlock, has had a business relationship with Yahoo.)
Hang on a minute here. McDonald's same-store sales have been weaker in recent months than they've been in years, and it's even missed earnings estimates a couple of times. On top of that, competition has gotten perhaps more fierce than ever. True. Wendy's (WEN) and Burger King (BKW) have upped the fight, just as so-called fast-casual chains such as Panera (PNRA) proliferate. Must mean trouble, yes?
The counter to that is McDonald's is still in line to make a profit of more than $5 billion this year, and to open hundreds more units on top of the more than 34,000 it already has globally. So its struggles are relative.
It's now giving itself a chance to be embraced by a press that's thrilled to run down Big Macs while praising its chipper little offspring Chipotle (CMG) for its do-goodery. To add a flourish to its tactical genius, McDonald's made its announcement with the endorsement of the Clinton Global Initiative, which is near to being sainted in certain circles.
Bottom line: The company undoubtedly will sell some of this healthier product, but it'll be largely incremental to revenue. Even if it's a disaster, the costs are probably going to be negligible. The power move in this is giving its critics a swift kick in the knees, yet keeping the brand protected. The business of Oak Brook isn't broccoli, and it won't be in your lifetime. It’s burgers, fries, chicken sandwiches and McRibs.
Detractors might tell themselves they've won a round. Arguably they have. McDonald's will now just get back to selling burgers by the millions and making money hand over fist.