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McTrouble in Fat Land

Pressured on the financial and health fronts, McDonald's must revisit the fundamentals that gave rise to its success.

November 17, 2002|Greg Critser | Greg Critser, a frequent contributor to Opinion, is the author of "Fat Land: How Americans Became the Fattest People in the World," to be published by Houghton Mifflin in January.

Blame Max Cooper. He is the former McDonald's Corp. executive and current franchisee who came up with the notion of a "value meal." Cooper, who in the mid-1970s began a wildcat experiment with the concept at his own stores, knew it was the next big thing. But he had trouble convincing other McDonald's executives.

"Oh, the moaning and groaning," he recalls. "All they could hear was that somehow I was advocating 'discounting,' which to them meant somehow devaluing the brand. But that wasn't what I was talking about at all. I was always talking about somehow replicating the notion of the table d'hote, as I had experienced it as a young man in Paris."

As anyone who has ever hoisted a Big Mac knows, McDonald's headquarters got only one part of Cooper's message -- and it wasn't the idea of bringing a French sensibility to fast food. What they grasped is that bargain meals, a.k.a. value meals, sell burgers. And as anyone who owns stock in the company knows, value meals (which soon morphed into the health nightmare known as supersizing) translated into higher stock values. That was because value meals did exactly what Cooper thought they would do: increase foot traffic and overall purchasing. In the long run they helped transform McDonald's into the most recognizable brand in the modern global food industry.

But recent trends -- seven quarters of declining earnings, this month's stock price slide, a revolt by 500 franchisees, layoffs overseas and at home, and a growing worldwide protest over the company's omnipresent and nutritionally troubling food -- point to an uncomfortable fact for CEO Jack Greenberg, who just last year was portrayed on the cover of Foreign Affairs as a virtual Atlas. It is this: McDonald's must fundamentally remake itself if it is to survive. And to do so, it must address the concerns of many of its biggest critics, and then boldly go even further.

Tinkering with the present formula -- as the company has unsuccessfully tried with its recent "Big 'N Tasty" campaign -- won't work. In almost every domain, McDonald's must revisit the fundamentals that gave rise to its success.

Consider supersizing. With obesity rates skyrocketing and government health policy increasingly attuned to the caloric imbalances that cause it, jumbo burgers and jumbo fries simply don't look so cool anymore. Worse, the concern is growing in lucrative overseas markets. Earlier this year, a major contretemps between McDonald's USA and McDonald's France erupted when the latter placed ads in popular women's magazines advocating that, for their health, customers should limit their consumption of fast food. (The collective "mon Dieu!" could be heard from Chicago to Paris.)

The fundamental notion -- more for less -- has turned out to be a bad idea for sedentary modern societies. So has the use of cheap but outdated ingredients. The commodity revolution of the early 1980s, which produced huge surpluses of cheap meats, fats and sugars, is increasingly besieged by bad economies. There are also more and more troubling studies implicating McDonald's core menu items in the development of chronic diseases, from dental caries (from the high-fructose corn syrup) to obesity (from the high saturated-fat content) to type 2 diabetes (from both).

Again, the fundamental notion -- McDonald's as the overlord of Midwestern commodity imperialism -- has turned out to have some troubling limitations.

"Omnipresence" -- the notion that McDonald's could always outstrip its competitors through sheer physical growth, opening 1,000 new stores a year -- has not only proved costly and self-cannibalizing, it has made the firm a pariah among powerful new urban interest groups. For 20 years the company's franchisees have successfully used taxpayer-supported Small Business Administration loan guarantees to create a new urban nutritional infrastructure targeting young minority males. No wonder communities are questioning the need for a McDonald's on every corner.

No one, of course, is writing obituaries for McAtlas. Yet. But considering the wrath and number of its critics and the aggressiveness of its competitors, McDonald's clearly needs to take some chances. That it can afford to do so is demonstrated by its recent decision to re-engineer its cooking oils to contain fewer unhealthful trans fats -- an admission, long coming, that its fries were unnecessarily unhealthful.

But that was too timid. In the arena of fats and oils, McDonald's needs to join the global 21st century, where much healthier oils are now available, particularly olive oil, which has become a cheap commodity with tons of urban cachet. It should find a way to use this new and very adaptable oil for deep frying.

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