How McDonald's has shaped the food biz
Company has been food innovator, although market share is slipping
In addition to being a regular contributor to CBCNews.ca, Peter Nowak is the author of the book Sex, Bombs and Burgers, part of which examines how innovations in the fast-food industry have influenced modern life.
McDonald's turns 75 this week, but the company is likely wishing it had more to celebrate.
Shifting consumer tastes are taking a toll, with sales declining, competition increasing and labour woes mounting.
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While the company is doing a lot of soul-searching about its future, looking back, there's no question McDonald's has had – and continues to have – a huge impact on the food industry.
With 36,000 restaurants in 119 countries serving 69 million customers a day, it's an accepted fact that McDonald's holds enormous sway over consumers' eating habits, food production and prices.
McDonald's is now the biggest purchaser in the world of beef, pork, potatoes, lettuce and tomatoes, and the second-biggest buyer of chicken, after KFC.
When it decided to add apple slices to Happy Meals a few years ago, the company quickly became the biggest buyer of the shiny red fruit in the United States.
Analysts expect the chain to soon become a power in kale as well, if its tests with the leafy vegetable – reportedly under way in Canada – are successful.
Indeed, every tweak to its menu has a butterfly effect, sending ripples that reverberate all the way to the dinner table, from the price of your meal to how it gets to your plate.
Decades of influence
The building of this influence began 75 years ago on May 15, 1940, when Richard and Maurice McDonald opened a drive-in burger restaurant on busy Route 66 in San Bernardino, Calif., just east of Los Angeles.
Dining out was previously reserved for the rich, but the drive-ins that were popping up around southern California catered to increasingly prosperous middle-class, automobile-owning families.
To boost volumes, the McDonald brothers refitted their operation with a bigger grill and spatulas that could flip several burgers at once. Cutlery and flatware were turfed in favour of disposable paper wrappers. The wait staff was fired and customers were expected to walk up to the window to place their orders.
The new-and-improved "Speedee Service System" impressed Chicago entrepreneur Ray Kroc, who initially visited the McDonalds to sell them milkshake makers. They ended up signing a deal for national franchise rights.
Kroc opened his first McDonald's in 1955 in Des Plaines, Ill. He introduced further volume-enhancing improvements, including modular stainless steel kitchens adapted from military submarines. From there, growth came rapidly.
By the early 1960s, McDonald's had several hundred restaurants in the U.S. International expansion started in Canada in 1967 with an outlet in Richmond, B.C. Nearly 50 years later, the company has 1,400 outlets in Canada.
The growth — both by McDonald's and the fast-food industry it has led — has transformed how people eat. In 1970, Americans were having about a quarter of their meals away from home, according to the U.S. Department of Agriculture. By 2012, that percentage had grown to 43 per cent.
Similar results have followed in virtually every country McDonald's has expanded into. McDonald's India, for example, estimates about 10 per cent of meals are eaten away from home now, compared to only three per cent in 2003.
Dedication to food safety
Analysts say McDonald's biggest impact on food has come in the form of rigorous controls over safety and quality, which other restaurants and chains have copied and improved on.
"They've developed some of the most effective food safety training programs in the industry," says Keith Warriner, a food science professor at the University of Guelph. "People look up to it."
The controls see their roots in the growing pains of the late 1950s. With hundreds of suppliers shipping to a similar number of restaurants, catastrophe was just waiting to happen.
"I'd wake up in the middle of the night from dreaming that we had bad beef and thousands of customers with upset stomachs," Kroc wrote in his 1977 autobiography, Grinding It Out. "I wondered how the hell we'd get over something like that."
Kroc established McDonald's first food research lab in 1957. Scientists there studied foods and why they spoiled, and came up with preventative measures. (Farmers were supplied with hydrometers, for example, which helped them measure moisture in potatoes.)
Kroc encouraged consolidation among meat suppliers and instituted a 50-item quality checklist that kept them from cutting corners. By the early 1970s, 175 suppliers had been cut to just five. By this point, McDonald's had the size and heft to force large-scale changes.
Several agri-giants arose as a result, including Keystone, Tyson and Golden State Foods. There have been downsides to the consolidation, such as the potential for the giants to bully farmers, but the upside has been fewer instances of contamination.
"You don't hear about many outbreaks centred on McDonald's," Warriner says.
Skilled at expansion
The company has also become adept at developing food production systems in developing countries.
When McDonald's Canada head George Cohon was charged with expanding the company into the Soviet Union in the late 1980s, he found a system that was years behind North America's. The company couldn't find reliable suppliers of power or gravel for construction, let alone beef and potatoes.
"In Moscow, we had explored all sorts of meat plants and dairies and bakeries and found that they weren't up to our standards," Cohon wrote in his 1997 autobiography, To Russia with Fries. "The simplest things became logistical headaches."
The company built a $40 million "McComplex" food-processing plant and invested in farmers' equipment, irrigation, soil and transportation networks. The investments helped modernize Russia's production system, to the point where President Vladimir Putin is now backing the creation of a domestic fast-food chain.
McDonald's has "skill in organizing the things that can benefit society in the long run," says Patty Johnson, global food analyst for market research firm Mintel.
Despite its contributions so far, McDonald's isn't in a position to take food to the next level, Johnson says.
Consumers, especially in developed countries, are demanding a move away from the so-called "factory food" movement the chain helped usher in.
In response, the company has been moving to more sustainable business practices. In March, McDonald's announced it was cutting back on the antibiotics used in its chicken products. A shift to purchasing verified, sustainable beef is also on.
Yet the changes to its public image have not helped McDonald's win more customers. In March, the Oak Brook, Ill.-based company installed a new chief executive, Steve Easterbrook, in hopes of engineering a reversal to sliding sales.
Analysts say that may be a tall order, since newer, nimbler fast-food chains such as Five Guys, Shake Shack and Chipotle are doing a better job of catering to consumers' changing tastes.
The next generation of food operators will undoubtedly benefit from McDonald's advances in the industry, says Johnson, but McDonald's own future may rely on the company getting back to its roots.
"I'm not sure that customers who are regulars at McDonald's are willing to pay the price to have organic, free-range. That's not their market niche."