McDonald's seeks its fast-food soul

McDonald’s is having an identity crisis. For years, it has lurched from showcasing new items — salads! Egg White Delight McMuffins! sliced apples! — to mining nostalgia for its basic Big Macs and fries.

Its core customers still line up at the drive-through window for cheap, quick cups of coffee and hash browns. But the company is also trying to appeal to more finicky eaters who have moved onto upstart competitors like Smashburger and Chipotle, which market their quality ingredients and food customisation.

Can McDonald’s be both fast and bespoke? Cheap and high-quality? Steve Easterbrook seems to think so. Easterbrook took over as the chief executive of McDonald’s on March 1, and last week he was in Las Vegas, where the company presented franchisees and suppliers with a new vision of McDonald’s. That “destination”, as it was called, was McDonald’s as “a modern, progressive burger and breakfast restaurant” where “customisation and made to order” are essential and where executives “align our food story around the consumer’s definition of quality and value”.

By Tuesday, when the meeting started, he was realigning the company’s food story. Easterbrook’s first major act as CEO was to announce that within two years, all the chicken served at its restaurants would be free of antibiotics, or at least those antibiotics also used in humans. It was a big move for McDonald’s, which is one of the biggest buyers of chicken, and one that pleased health officials who see overuse of antibiotics in animal husbandry  — and the resulting antibiotic-resistant strains of bacteria — as a serious threat to human health.

A 47-year-old British national, Easterbrook has spent nearly his entire career in Europe, most of it with McDonald’s. He is credited with turning around the company’s 1,200-store business in Britain in part by doing things — reducing the salt in fries, adding organic milk — that appealed to a more health-conscious consumer.

While some analysts have urged the company to stop trying new things and focus on its core burger business, Easterbrook pushed back on that notion at a meeting with investors this year. “To me, he seemed clearly wedded to the notion that they need to try new things to restore growth,” said one analyst who attended the meeting.

Easterbrook, who declined to be interviewed, may find the challenge in the United States particularly daunting. His predecessor certainly did. While McDonald’s is still the world’s largest restaurant chain, with more than 36,000 outlets — about 14,000 of those in the United States — its performance is slipping fast. Same-store sales have fallen over the last five years, and last year the company turned in a miserable performance.

Once, McDonald’s was a place where every American ate now and then. But the fast-food market has splintered, like many other parts of the economy, into the haves and the have-nots. Upscale fast-casual restaurants like Smashburger and Chipotle attract customers who will pay $5.99 for the Classic Smash burger (“handcrafted” and “seared and seasoned to order”) or $6.65 for a steak burrito (“organic and local produce where practical”).

The menu might be full of calories, but it comes with a halo of quality. The McDonald’s core customer, on the other hand, is still looking for a break: A $3.99 Big Mac, served fast. In fact, roughly two-thirds of its customers order at a drive-through counter.

If Easterbrook is trying to attract a more affluent, food-conscious customer, he is surely aware of all the ways McDonald’s has already stumbled on that path. Mike Donahue, who headed communications at McDonald’s from 1987 until 2006, points out that the company has tried a dizzying array of tactics to reinvigorate its business and shed its bad-food image, like new products, healthier options, lower prices, higher prices, store revamps and greater transparency, to little avail.

“Now more than ever, the company is facing the perfect storm that is challenging its very relevancy,” said Donahue. He left McDonald’s to help start Lyfe Kitchen, a restaurant chain that markets healthy meals and local ingredients.

McDonald’s rivals are winning on taste and image. To catch them, the company might have to sacrifice on speed, which has been its main advantage. And even on that score, it’s not doing so well.

“The two key words in fast food are 'fast’ and ‘food,’ and McDonald’s is no longer fast, and its burgers ranked last in a Consumer Reports survey recently,” said Larry Light, chief executive of Arcature, a consulting firm, and a former McDonald’s executive. “Those are their No. 1 and No. 2 challenges, but I’m not sure they know it.”