Tag: McDonald’s

India NGO Study Takes Aim at U.S. Snack Food Brands

Posted on April 10, 2012

As schools in America gear up for a nutritional overhaul of their meals, thanks in part to a campaign by First Lady Michelle Obama, a new study by the Centre for Science and Environment (CSE) is urging schools in India to ban junk food within their premises.

CSE, a New Delhi-based non-governmental organization, recently tested 16 major brands of foods — including some from leading multinationals like Nestle, PepsiCo, McDonald’s and KFC (firms that have also come under fire from U.S. groups working to curb childhood obesity and promote healthier diets.) The study, “Nutritional Analysis of Junk Food,” is aimed at making Indians aware of what popular food items really contain and how they impact one’s health.

According to CSE, most of the brands tested contain very high levels of trans fats, salt and sugar. The study points out that the levels are far higher than the recommended amounts. (The National Institute of Nutrition and the World Health Organization have set certain benchmarks of how much salt, sugar, carbohydrates and fats every individual can have on a daily basis to stay healthy.) The CSE study further notes that many companies resort to large-scale misbranding and misinformation.

For instance, while Indo Nissin’s Top Ramen Super Noodles (masala flavor) claim zero trans fats, the CSE study found the product had 0.7 grams of trans fats per 100 grams. The CSE study also reported that a 100-gram package of PepsiCo’s Lays potato chips contained 3.7 grams of trans fats, although the company says it contains none. An 80-gram package of Maggi noodles has over 3.5 grams of salt. This is more than 60% of the daily recommended amount, but salt does not feature at all in the product’s nutritional label.

Chandra Bhushan, deputy director general of CSE, says that “the food-related laws in India are inadequate.” He notes that “while what the companies are doing may not be illegal, it is definitely unethical.” Bhushan adds that when PepsiCo began cooking some of its Lays products in rice bran oil, which is a healthier cooking medium, the firm heavily advertised the change, adding the “Snack Smart” label to those items. But when the firm recently switched over to palm oil, it quietly removed the label. “It amounts to misleading the consumers,” Bhushan states. (PepsiCo CEO Indra Nooyi has recently faced some criticism over the flat earnings and waning customer interest that followed her efforts to introduce wholesome offerings into the company’s line of sugary beverages and snacks.)

The mismatches in nutritional information listed on products sold in India versus what is available elsewhere is yet another of CSE’s concerns. “We have very clear evidence that the nutritional information shared in India and the U.S. for unpackaged junk foods is very different,” Bhushan says. “McDonald’s, for instance, gives information on 22 nutritional attributes on its website [in the U.S., while its Indian counterpart provides information only on six nutritional attributes. Unlike in the U.S., it provides no information on the trans fats. KFC’s American website also provides information on 12 nutritional attributes, including the serving size, types of fats (including trans fats), and fibers. But its Indian website gives nutritional information on only four attributes."

According to Bhushan, the information provided by the companies in India is meaningless since they decide the serving size arbitrarily. He proposes mandatory labeling that also provides data for serving size, trans fats, saturated fats, sugar and salt.

Meanwhile, the companies studied in the CSE report have refuted the allegations. According to a PepsiCo India spokesperson, "[The CSE report] is contrary to the consistent test reports we have, which indicate the trans fats to be well within the regulatory norms for making a claim of ‘trans fat free.’” PepsiCo, in fact, goes as far as to say that “all food products manufactured by PepsiCo India are trans fat free.” According to the company’s official statement, “Trans fat is produced during the hydrogenation of vegetable oils. Since the launch of our business in India, we have not used hydrogenated vegetable oils to manufacture our food products, and therefore none of them contain trans fat.”

According to a spokesperson for Nestlé India spokesperson, “Nestlé packs in India carry the nutritional compass that helps consumers understand nutrition. Nestlé in India, as in other parts of the world, fully complies with legislation and regulations.”

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A New Big Mac

Posted on March 26, 2012

When McDonald’s CEO Jim Skinner retires this summer, he will be leaving behind a company that by all accounts has had a decade of successes. Newly anointed CEO Don Thompson has been a big part of that.

Thompson, for example, led the company’s foray into specialty coffee drinks and new menu offerings, helped it weather the recent economic downturn, oversaw redesigned stores and improved customer service (including double-lane drive-thrus), and pushed for greater international expansion, according to an article in The Wall Street Journal. Thompson is currently McDonald’s president and chief operating officer.

The question for Thompson is whether to stay the course — and hope that McDonald’s exceptional performance over the past decade won’t begin to lag — or try some new initiatives that could ensure even greater forward momentum.

Wharton management lecturer Adrian Tschoegl advises him to stay the course. “In terms of geographical expansion, McDonald’s is pretty much everywhere they want to be,” he says. They are absent in most of Africa, but “they have good reasons for not being there. One is that they would need to maintain the quality of the food they sell, and that can be difficult. It requires strong infrastructure, good storage facilities, reliable suppliers, well-functioning ports and so on. Plus there are issues around political risk.” Adding a store in China in a second-tier city “would probably mean more to the bottom line than adding stores in some capitals in Africa,” says Tschoegl.

In addition, the company “got into trouble overexpanding in some of their markets in both the U.S. and abroad,” Tschoegl notes. “That is what Skinner helped turn around in 2002 by focusing on two things: the mechanics of delivery, meaning operations, and upgraded product offerings.” McDonald’s has been abroad long enough that it now faces domestic fast food competitors — not just American firms like Burger King, Wendy’s and Domino’s Pizza, Tschoegl adds. “So they can no longer survive by being different and exotic. They have to be better. One way is through [maintaining] operational excellence, and they have done that.” 

He points to other McDonald’s initiatives already in the works, including McCafe, a competitor to Starbucks, that is being introduced in the U.S. and internationally. And in Europe, McDonalds is starting to move “just a tad up-budget. They are not planning to roll out tablecloths and candles, but some of the food offerings seem to be much more tailored” to that part of the world. “They even hired a chef in Europe to help them out.”

Indeed, an article in February in The Wall Street Journal noted that in France, McDonald’s is about to offer the McBaguette, a burger served on a baguette and topped with French-made cheese and mustard. The goal is to appeal to a slightly more affluent customer, one for whom high-quality bread is an important part of the menu.

Given all this activity, “my opinion is that Thompson could do worse than continue on with the current agenda,” says Tschoegl. “It has been working well for the last 10 years.”  

Others seem to agree. An article in Fortune posted on CNN.com suggested that “Thompson’s biggest challenge as CEO will be to maintain the momentum that took hold on Skinner’s watch,” and quoted the new CEO’s description of Skinner as “one of the strongest mentors I’ve ever had. He’s given me tremendous room in terms of the day-to-day business of McDonald’s.” The article also referred to an earlier profile of Skinner in which it described “his leadership as having brought on nothing short of a Golden Age for the Golden Arches.” Profits in 2011 were $5.5 billion, “more than double what they were in 2004, the year Skinner took over. The stock reached an all-time high of $102.22 on January 20.”

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Will Sponsors of the London Olympics Reap Rewards — or Controversy?

Posted on July 26, 2011

With just one year to go before the 2012 Olympic Summer Games begin, the PR machine of its organizing committee — including Lord Sebastian Coe, its chairman — gathered foreign press in London on Monday to run through all of the preparations taking place for next summer’s mega-event, which runs from July 27 to August 12.

Britain has spent the past six years since it was awarded the 2012 games getting ready to accommodate the event, noted Coe. With its £2 billion budget (US$ 3.23 billion, raised largely from private-sector sponsorship deals as well as broadcasting rights and merchandising), the committee is on its way to delivering an Olympics and Paralympics (which take place August 29 to September 9, 2012) involving 36 competition venues, 14,700 athletes, 21,000 broadcasters and members of the media, 10.8 million ticket holders, 6,000 paid staff and up to 70,000 volunteers. “We think we’re in good shape,” said Coe, a four-time Olympic medalist in track and field who competed in the 1980 and 1984 Games.

But are its sponsors? Invariably with any big sporting event these days, marketing experts are keeping tabs on the legion of companies sponsoring the Games to find out who’s getting the biggest bang for their buck. “All these things are about money,” Kenneth Shropshire, director of the Wharton Sports Business Initiative, told Knowledge@Wharton before the Super Bowl earlier this year. “There are more and more of us trying to find out what value you are getting if you are the sponsor of a site or a broadcast.”

In terms of brand management, many sporting-event sponsorship deals leave a lot to be desired, according to Dominique Turpin, president of Switzerland’s IMD business school. His research on corporate sponsorship has found that firms investing several million dollars as sponsors of the 2012 Olympics will need to spend at least two to three times that amount to leverage the event fully. That means deploying a strategy that encourages consumers to “engage” with the company by, say, rolling out new products, creating Olympics-branded packaging or launching a major advertising campaign.

Samsung is one sponsor that Turpin says is setting itself up to win. For one thing, the company has signed up soccer star David Beckham as its Games “ambassador.” For another, it has launched a campaign for people to nominate 60 inspiring individuals to take part in the 70-day torch relay carrying the Olympic flame around Britain — one of several accessible pre-Games events designed to ensure  that “everyone in the country is engaged,” said Coe.

But there are kinks. As corporate sponsors of previous events know too well, much can go awry at an event on the scale of the Olympics. At the Beijing Games in 2008, many sponsors drew fire from anti-China activists up and down the spectrum as politics, human rights and other interests clashed during the torch relay. The London Games have already had a taste of such controversy.

A case in point: “What about McDonald’s sponsorship?” asked one journalist at the press gathering. Indeed, for an event with the grand vision of “leaving an international legacy” — in Coe’s words — and a goal of introducing young children to sports, it’s hard for locals to ignore that along with its global sponsorship of the Summer Games, the fast-food giant will be giving London and visitors to the Olympic Park its largest-ever restaurant — with 3,000 square meters and 1,500 seats. The location is one of four McDonald’s opening at the site; the company expects the restaurants to serve a combined 1.75 million meals during the Games. “It is clearly sending the wrong signal to kids and young people,” Amir Khan, an Olympic boxing silver medalist for Britain in 2004, told The Daily Telegraph newspaper, joining a chorus of local disapproval in July. “The Olympics are a great opportunity to show young people what types of food they need in different aspects of their life. I think this is a mistake.”

Coe’s response? A pragmatic one. While pointing out that McDonald’s has been an Olympics sponsor since 1976, he noted, “[If] we don’t have sponsors, we don’t have a game.”

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Ronald McDonald — Ambassador of Goodwill — Or Purveyor of Poor Health?

Posted on May 19, 2011

In a recent episode of the CBS series The Good Wife, the fictional Lockhart Gardner law firm represents a woman who owns an adultery website.

At one point, attorney Alicia Florrick has a debate with her client about whether the site can be held responsible for a user’s murder. “Do you blame the beer for [a] DUI?” the website owner asks. “No, but I might blame the bartender,” Alicia answers.

In the fight to curb childhood obesity, a group of health organizations are raising similar questions. Led by the nonprofit watchdog group Corporate Accountability International, more than 550 individuals and groups signed an open letter asking McDonald’s to stop marketing junk food to kids. The letter, which ran Wednesday in newspapers across the country, called on the fast food giant to abandon toy giveaways with Happy Meals and to retire Ronald McDonald, described as an icon “as recognizable as Santa Claus.”

The group also submitted a shareholder’s resolution asking the chain to produce a report on its “health footprint,” or how McDonald’s offerings and marketing efforts impact public health issues, including obesity. Investors rejected the proposal and today McDonald’s CEO Jim Skinner said Ronald McDonald — who Skinner described as “an ambassador for good” — is here to stay.

“He does not advertise unhealthy food to children,” Skinner said.”We provide many choices that fit with the balanced, active lifestyle. It is up to them to choose and their parents to choose, and it is their responsibility to do so.”

Is Ronald McDonald getting a bum rap? And would jettisoning the character or Happy Meal toys — already the focus of a San Francisco ordinance establishing nutritional standards for kids’ meals that come with giveaways — really turn the tide against obesity?

“Ronald McDonald is part of the heritage of the McDonald’s brand and continues … to play a role in the company’s advertising for children,” Wharton marketing professor Patti Williams notes. “That said, I am not sure he is central to the McDonald’s brand for most children today, or most McDonald’s customers more generally.”

Williams suggests that Ronald could be phased out with limited negative repercussions for the chain. Happy Meals, however, are another matter. “I suspect that often the happiest part of the Happy Meal is, in fact, the toy,” she says. “The loss of the toy, and the advertising opportunities that a constantly shifting slate of toys offers, is likely to be much more damaging.”

In light of the McDonald’s letter and the recent release by the Federal Trade Commission of voluntary standards for marketing food to children, how to entice young people to try a particular product is likely to become a greater concern for many companies.

On the heels of a 2005 decision by Kraft to stop advertising Oreos and other snack foods during television shows aimed at young children, Knowledge@Wharton asked experts how companies should respond to worries about contributing to the spread of obesity.  According to Wharton marketing professor Barbara Kahn, “marketers typically go after customer value,” which includes offering products that customers are willing to pay for. “Marketers are not making people eat unhealthy foods. They are just delivering what the customer wants…. I would be a better McDonald’s customer if I felt satisfied with the food and didn’t gain weight. So they would keep me as a loyal customer [if they continued offering healthier choices]. But there are people out there who don’t care if they gain weight, and some marketers will appeal to that segment. Marketing responds to the free market.”

But Margot Wootan of Center for Science in the Public Interest argued that companies try to create demand for their products, often at the expense of more nutritional options. “When a child begs his or her parents to go to McDonald’s for dinner, that choice is competing not only with Wendy’s or Burger King, but with a meal cooked at home,” said Wootan, who helped draft the new federal standards. “Marketing works. That’s why the industry does it and why health advocates are concerned about it.”

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