With all the furor over Beyond Meat’s (NASDAQ: BYND) recent IPO and the wider move towards meat substitutes, a surprising bit of news also came out in recent weeks: Americans are eating more McDonald’s (NYSE: MCD) burgers.
In May 2018, the fast-food giant announced the roll-out of fresh beef patties to most of its U.S. stores, replacing the frozen patties previously used. A little over a year later, the company has announced that sales of the iconic Quarter Pounder burger are up about 30% on average in the past year since the launch of the fresh beef patties.
In an interview with USA Today, McDonald’s senior vice president of supply chain management Marion Gross said, “Our customers are loving it. We sold 40 million more Quarter Pounder burgers nationally in the first quarter of this year compared to the quarter in 2018.”
Though it reportedly cost more than $60 million to roll-out, it’s clear that McDonald’s new strategy is a necessary response to shifting consumer demands. There is a clear preference amongst millennials for healthier foods, with other competitors in the industry like Wendy’s (NASDAQ: WEN), Five Guys, and Shake Shack (NYSE: SHAK) also beginning to promote the use of fresh — not frozen — beef.
A long term commitment was also made by McDonald’s to curtail the use of antibiotics in the beef they source due to the F rating they received in a Centre for Food Safety report last year. In addition to this, their health drive is evident in items introduced for children like apple slices, low sugar juices, yogurt, (preservative-free) chicken and ice cream in Happy Meals.
Personal dietary concerns are not the solitary concern for the modern-day consumer though. With more and more emphasis being put on the supply chain and ethical sourcing of food, McDonald’s has also announced their intention to move to cage-free eggs within the next decade in response to humane animal treatment concerns faced in the past.
But is this enough? Unlike competitors such as Burger King, McDonald’s has been slower in adopting vegetarian and vegan options. Recently, CEO Steve Easterbrook said that the company is trying to determine the added complexity such menu options would bring and if these complexities were “worth it”.
There has been an undeniable trend of people trying to reduce their meat intake for other reasons, with a study by John Hopkins published last year showing that two-thirds of Americans have reduced their intake of at least one meat, with the most common reasons being cost and health concerns.
This is partly the reason for all the hype around Beyond Meat’s recent public listing. But does that mean alternatives like Beyond Meat will be an instant replacement for the Big Mac?
On the cost front, the answer is no — at least not yet. Plant-based substitutes currently cost much more than a regular beef patty, with the Impossible Whopper at Burger King (made by rival Impossible Foods) costing $2 more than a traditional Whopper, and two Beyond Meat patties retailing for $5.99 — far more than even organic, grass-fed meat. Of course, economies of scale will eventually kick in that will help them to bring costs down (the company was actually selling every burger at a loss until quite recently), but for now, the cost is not going to help Beyond Meat win over consumers.
On the health front, it’s more complex. There’s plenty of debate on whether red meat is healthy for you to begin with. On a like-for-like comparison with regular beef patties, however, the plant-based substitutes don’t appear to offer much health benefits. The Beyond Burger actually has more calories, more fat, more carbs, and far more sodium than a Burger King patty (certainly not the healthiest of the traditional meat options), and while Beyond Burgers do contain a high level of protein, the pea protein isolate that makes up the patties would never be considered a vegetable by nutritionists.
However, A study by the University of Michigan found that producing a Beyond Burger uses 99% less water, 93% less land, 46% less energy and produces 90% fewer greenhouse gas emissions than a regular beef patty. So whereas the industrial beef industry has been frequently cited as one of the biggest offenders in terms of humanity’s negative impact upon the earth, meat-substitutes like Beyond Meat might be providing the answer.
For now, it’s clear that the move to fresh beef for McDonald’s was well-received by consumers from the perspective of taste and wider brand optics. However, as meat-free technologies advance and consumer tastes continue to shift, it will be of vital importance for company’s like McDonald’s to have their own future strategized.
Better tasting hamburgers might give the company a boost in the short-term, but it’s the wide-angle lens that will ensure tomorrow’s customers keep returning to the Golden Arches.
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James is the head of content and publishing at MyWallSt. James’ favorite stock is Teladoc because he believes that they are at the forefront of revolutionizing the healthcare industry.