Ronald McDonald sat in his Oak Brook, Ill., headquarters in a mental fog. He could barely move, save for a few spastic convulsions. His brain was wasted. The outsize clown and burger peddler was suffering from what flummoxed health experts like to call “Alzheimer’s on fast forward.” In fact, he was North America’s first diagnosed case of bovine spongiform encephalopathy.
When, earlier this month, McDonald’s announced an earnings shortfall, it became clear that the disease which has plagued the global economy for the past decade had finally hit Americans. It had hamburgled them where it hurts most: in their pocketbooks.
“Effectively, most of the European market for beef is gone,” says Harvard University professor James Watson, who studies food and culture and edited a book about McDonald’s international expansion efforts.
Mad cow disease and, more recently, the outbreak of foot-and-mouth disease across Europe have exacted a staggering toll on McDonald’s bottom line, cutting into profits and also paring off billions and billions of dollars from the global giant’s stock value.
Not a single case of Creutzfeldt-Jakob disease, the human form of BSE (also called mad cow disease) has been linked to the Big Mac. But the recent beef scares have apparently been enough to send Germans and French fleeing to their nearest kebab stands. European sales at McDonald’s in January and February fell by 10 percent, no small amount considering the company derives as much as 36 percent of its overall operating income from the continent. The news was greeted with tears on Wall Street, and the stock quickly fell to its lowest in three years — at $27.55 a share, the price was almost half of its all-time peak of $50 in 1999.
In a statement announcing the hit mad cow had taken on the company, McDonald’s CEO Jack Greenberg wrote March 14, “The effect of consumer concerns regarding the European beef supply has persisted longer than we expected, despite the fact that McDonald’s overall safety and quality standards lead the industry and provide the benchmark for safe food around the world.”
Those venerated arches have been buckling under the intense pressure of a collapsing beef market in Europe. All those nightly newscasts of massive cattle burnings didn’t do much to drive hamburger sales. In France alone, beef sales have plummeted 40 percent since BSE hit the mainland of the continent. The European Union’s commissioner for agriculture, Franz Fischler, recently told the German daily Frankfurter Allgemeine Zeitung, “BSE is the biggest crisis that European farming has ever had to face. It drastically changed the prospects for the farming market that we envisioned in 1999.” As one of Europe’s largest beef resellers, McDonald’s has been hit in its core there. It’s also forcing a company that has been associated with burgers and fries since the opening of its first store in 1955 in Des Plaines, Ill., to reckon with a new reality: The future of its staple product, the hamburger, is increasingly imperiled.
For a while now, McDonald’s has been marketing nonbeef products like Chicken McNuggets and McRib sandwiches. It has also marketed vegetarian products, like Veggie Macs, in New York and Amsterdam. In London, it sells the McChicken Korma Naan, a nod to the local Indian and Pakistani populations. In India, where cows are sacred and beef eating is taboo among some groups, the lamb Maharaja Mac tempts local appetites. Now the beef scare is forcing McDonald’s to fast-track the mainstreaming of these products — its future may depend on it.
Visit the Golden Arches on Paris’ Champs-Elysées or in Berlin’s sprawling new Potsdamer Platz technopolis and you’ll see that changes in the product lineup are already being made. Rather than focusing on the fare that’s kept its profits humming for half a century, the company is conspicuously downplaying beef in special offers, extra-value meals and restaurant menu boards. Instead, the company is promoting its chicken and pork products, like the McRib and the newly introduced McToast, a sort of down-market ham and cheese croque-monsieur for the on-the-go set.
To gauge the magnitude of this burger culture shift, just try to imagine John Travolta’s Vincent Vega character in “Pulp Fiction,” who offers a sentimental tribute to the Hamburger Royal (they don’t have Quarter Pounders in Europe; they use the metric system, after all) in the film, reminiscing fondly about a ham sandwich. While analysts see this latest beef crisis as only a passing problem, others, especially academics and journalists studying fast food, suggest that our hallowed symbol of the square American meal is on its way to the circular file.
Already, increased awareness of the beef scare in the U.S. has forced McDonald’s to change some of its practices. Days after the company announced its earnings shortfall, it also tried to assuage public fears about BSE or foot-and-mouth infecting the livestock it uses to make Big Macs here in the States. The company announced on March 14 that it would begin carefully auditing beef from all of its suppliers — from the sprawling feedlots and the abattoirs all the way to the fryer at your local McDonald’s — to ensure the beef came only from suppliers that adhere to federal regulations banning the use of ruminant meat or bone meal in livestock feed. That material can include the brain and spinal cord matter, which is believed to harbor BSE. Feeding such matter back to livestock is believed to have caused the spread of mad cow disease in Europe.
McDonald’s gave its suppliers a deadline of April 1 to provide documentation that their cattle hadn’t been fed with meat and bone meal from cattle or other ruminants. The Food and Drug Administration banned the use of mammal proteins in livestock feed in 1997, but those standards have been ignored by many cattle ranchers.
The day the steps were announced, McDonald’s spokesman Walt Riker told the Wall Street Journal, “We could do better from a prevention standpoint. Because of the [mad cow] issue in Europe, we thought it was absolutely prudent and common sense to say, ‘Let’s look to see if anything needs to be tightened up.’”
The company also said it would create a blue-ribbon committee of doctors, scientists and other experts to find ways to eliminate the risk of mad cow disease in McDonald’s products.
Time after time, U.S. officials have stated that regulations here will prevent the introduction of mad cow disease in the U.S., only to be discredited by embarrassing revelations, the latest of which was news in January that feed manufacturer Purina had shipped the wrong meal to a Texas ranch. As a result 1,222 cattle were fed banned meat and bone meal. The cattle were quarantined and ultimately tested negative for BSE. But the embarrassment only got worse when an investigation by the FDA showed widespread noncompliance with the regulation.
The scary news led to a crackdown and tougher enforcement — by both government regulators and companies like McDonald’s, which stand to lose the most if foot-and-mouth or BSE is ever discovered in the United States. According to a report in the Wall Street Journal, McDonald’s convened a meeting on Dec. 18, over a month before the Texas incident, to determine whether its suppliers were adhering to federal standards.
In some respects, these scares have been overly hyped. The United States moved very early to keep BSE from coming to these shores. It banned the import of beef and other ruminants from the United Kingdom in 1989; it banned imports from continental Europe in 1997, following outbreaks there.
But the new auditing procedures, no doubt, were also influenced by the frighteningly close call McDonald’s had in Italy earlier this year. In January, cows were discovered at the Italian meat processor Cremonini that were suspected of being infected with BSE. The announcement shook McDonald’s foundations, since Cremonini is the company’s exclusive supplier of hamburger patties in Italy. The company quickly announced that there were no cattle earmarked for Big Macs at the plant where the suspected cases were found. But the fact that the scare hit close to home demonstrated how important it is for companies like McDonald’s to be able to determine the provenance of the food products they sell.
“The problem has always been with ground beef,” says journalist Nicols Fox, author of “Spoiled: Why Our Food Is Making Us Sick and What We Can Do About It.” “One has the potential of including those infectious bits of the cow, and that’s why McDonald’s has taken this proactive stance, as you noticed last week.”
“How do you know what’s in a hamburger?” she asks. “There’s something called ‘mechanically recovered meat’ and that’s a serious, serious problem. It can have spinal cord in it, and that’s the infectious part with regard to mad cow disease. People are going to look a little more suspiciously at hamburger, at least in Europe. I don’t think most Americans have any idea about recovered meat,” she says.
If McDonald’s rapid response was a public relations move, it was also proof of lessons learned from previous health crises, such as the E. coli outbreak of 1982, when tainted beef at McDonald’s restaurants caused outbreaks of the illness in Oregon and Michigan. According to author Eric Schlosser’s “Fast Food Nation,” McDonald’s kept mum about its role in the outbreak at the time. He notes that the closest the company came to acknowledging its role was the admission by a company spokesman of “the possibility of a statistical association between a small number of diarrhea cases in two small towns and our restaurants.”
But as author Fox documented in her book “Spoiled,” the company was the culprit in the outbreak. Years on, after the 1993 outbreak of E. coli at Jack in the Box restaurants in Seattle, the cumulative number of deaths in the U.S. relating to that beef-borne disease has been greater than the number of deaths attributed to mad cow disease in Europe. And yet, our confidence in beef here is nowhere near as shaken.
Fox says the E. coli outbreak did little to hurt the public perception of McDonald’s. “Almost no one knows McDonald’s was associated with E. coli. There were news reports in 1982 that lasted a day.” But it did serve as a wake-up call, and Fox says the company moved quietly and quickly to eliminate the problem. “They were among the first to make certain that their meat met a bacterial standard. They instituted changes in the way they cooked beef that were extremely helpful in making certain that they didn’t have problems with undercooked burgers. Other companies didn’t follow suit fast enough,” she says, pointing to the Jack in the Box catastrophe.
Fox believes fast-food hamburger became a significantly safer product as a result of the scares. “I always tell people that hamburgers from the fast-food places are probably safer than ones you make at home — in terms of bacteria.”
The proactive stateside move, made despite the fact that there has been no documented case of mad cow disease in the U.S., is indicative of a recent trend at McDonald’s, which has changed its product and marketing practices in American and other markets as a result of health concerns and environmental controversies in Europe. The company’s move to ban the purchase of genetically modified foods, like Monsanto New Leaf potatoes, for its french fries came as a result of fears that massive consumer protests in Europe, where the debate over biotechnology burns much hotter than here, might spread to the U.S. As a global company, it is able to detect problems with incredible speed and then make tweaks to the system in other countries to avoid the replication of controversies or risks that could adversely impact its market.
“McDonald’s has a very good, strong management system,” says Harvard’s Watson, who edited the book “Golden Arches East: McDonald’s in East Asia.” “These people are very good and very responsive to global issues. It’s characteristic for them to move rapidly, not only to respond to the genetically modified food fright in Britain. They were among the very first corporations to move in that direction. More recently, they were also among the first to reassure their clientele in Europe about the beef they provide.”
Watson praises McDonald’s swift and forthright response to BSE. “They’ve learned from the mistakes the British government made by trying to stonewall and trying to ignore it. They operate very quickly for the obvious reason that the managers in the European markets are local people.”
Watson also sees a link here to globalism. “McDonald’s and GMOs and the mad cow scare are all part of a package of how these issues have become global. Food is the next big global issue, and meat and the exchange of meat is what it’s all going to be centered on. Mad cow disease is becoming a disease of global trade. Of course, the American Department of Agriculture and the cattle industry are working very hard to be certain it doesn’t hit here,” Watson says.
But are they doing enough? Though there has not been a single physical outbreak of mad cow disease in the United States, awareness of the lethal pathogen is growing as a result of increasing media scrutiny. “I don’t think that most Americans think that mad cow disease is here or that foot-and-mouth disease is here, but they’ve begun to get a bit queasy,” says Fox. “McDonald’s is very aware that either one of these could come here. There’s no fence around America that’s going to keep them out. We have globalized trade, and trade is a pathway for pathogens. Every single day there are millions of things and people going in and out of this country. How long can we keep these illnesses out? The Europeans understand this better than we do.”
Thanks to intensive industrial farming, Fox expects, “we’re going to have more and more of these problems. Sometimes I feel like a hunter-gatherer trying to find something good to eat,” she says.
There’s a growing rift between business analysts and academics and journalists over how long the current beef scare will last. Most analysts believe the worst may be over, and that sales will return in Europe as soon as the most recent crises pass. But academics and journalists who have studied the fast-food and livestock industries believe there will be a long-term trend away from hamburger and other beef products that will force McDonald’s and other fast-food chains to reinvent their menus.
Part of this has to do with increasingly sophisticated palates here in the United States. Another aspect is the growing concern about the safety of beef — a trend neatly illustrated by the recent success of “Fast Food Nation,” a carefully reported tome that offers a damning portrait of the fast-food industry reminiscent of Upton Sinclair’s “The Jungle.”
Some analysts are skeptical about whether McDonald’s responsive marketing can get Americans to shake the deeply ingrained taste they have for beef. “It is wise for everyone to explore ways to reduce their reliance on beef, but when you think of McDonald’s, what do you think about? Burger, fries and Coke,” says Allan Hickok, a Minneapolis analyst with U.S. Bancorp Piper Jaffray who tracks McDonald’s. “When I think, ‘Honey, let’s go out for a salad,’ I don’t think of McDonald’s. You’re going to be bucking 40 years of educating the consumer as to what they’re all about. The bottom line is that we don’t know much about BSE. McDonald’s and everybody else can attempt to do all they want, but if we have a case of BSE here, all bets are off. The same things will happen here that happened in Europe because the disease is so grisly.”
But academics expect that efforts made by McDonald’s to change its image from burger flipper to diversified restaurant will pay off as the public increasingly looks for alternatives to beef. Harvard’s Watson, who tends to wear the hat of a food futurist, says, “It’s likely to have a much longer effect than many market analysts are giving it credit for. We’re now entering a new phase in global dietary change, where beef and other kinds of meats are going to be increasingly perceived as too dangerous to consume.
“You and I are too young to see this coming,” he predicts. “By the end of the 22nd century, there’s going to be a real dichotomy between meat-eating cultures and those that have effectively gone beyond meat eating or into something else altogether. As our meat processing becomes more and more industrialized and vulnerable to problems such as mad cow disease and all sorts of other things, you’re going to have increasing moves in this direction,” Watson argues.
Peering even deeper into the crystal ball, Watson sees a future where eating a McDonald’s hamburger or beef of any sort will be roughly analogous to the consumption of pufferfish in Japan. Despite highly trained chefs who are masters at cutting out the toxic portions of that delicacy, there are still several deaths stemming from the dish in Japan each year. “I suspect that probably not within too many more decades, meat will be perceived by some cultures in the same way.”
Thus, 50 years down the road, toddlers may scream for Veggie Mac Happy Meals rather than burgers and fries. And it won’t be any kind of green movement that gets us there, but rather a neopragmatism about food safety.