McDonald's CEO provides details on fresh beef conversion

by Joel Crews
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With a goal of transitioning to the new format in about one year, Easterbrook says restaurants and suppliers are making adjustments.
 
OAK BROOK, Ill. – McDonald’s Corp.’s announcement in late March that it plans to transition to using fresh versus frozen beef patties to make its Quarter Pounders, has suppliers to the QSR giant working behind the scenes to meet the 2018 deadline. During a conference call with analysts to discuss the company’s Q2 results on July 25, President and CEO Stephen Easterbrook gave some insight into the decision-making process and what the conversion means logistically for McDonald’s and its supply chain. 

Easterbrook said he and CFO Kevin Ozan visited the two test markets, with Ozan going to Tulsa and Easterbrook to Dallas to assess whether the Quarter Pounder was tastier and juicier using fresh beef.

Steve Easterbrook
Steve Easterbook, President and CEO of McDonald's 

“So, we had a resounding yes from the consumer on this one,” he said, and the process of making adjustments to the supply chain has begun. “…As you can imagine, our patty suppliers have to adjust both the way they prepare and then store and transport the finished product. So, we’re working our way through.”

He went on to say the plan is still to have the transition completed by the second quarter of 2018 and that the fresh beef conversion will also include McDonald’s Signature Crafted premium line of burgers. The decision to convert the rest of the burger offerings to fresh is still being considered as adjustments to the fresh-beef supply system also affects in-store operations and labor costs. Ozan noted to analysts that margins at company-operated restaurants declined 30 basis points as positive comparable sales were offset by higher wages and “purposeful investments that we’ve made to ensure that we execute at a high level and provide a great experience for our customers as we deploy mobile order and pay, accelerate the rollout of Experience of the Future and ready the system for the introduction of fresh quarter-pound beef patties next year.”

“There’s a lot of change that has to be absorbed in a restaurant level right now, which talks to Kevin’s previous point about why we are purposefully investing labor and training and capabilities in our restaurants to have all the technology advances, Experience of the Future adjustments, the enhanced hospitality, all the way to fresh beef,” Easterbrook said. “So, it’s a balancing act for us. But the customer will always be our ultimate guide.”

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READER COMMENTS (1)

By John Jessup 7/26/2017 1:38:34 PM
When the McDonald's CEO says "fresh hamburger" does he mean never frozen or does he mean when the product gets to the restaurants it is refrigerated? Their suppliers could buy frozen trimmings and make patties from that product and never freeze the patties.