A Quarter Pounder Shift

McDonald’s made a risky decision to switch to fresh beef patties. How did it turn out?

It took half a decade, but McDonald’s once again claimed a crucial win over its competitors—thanks to fresh approach to one of it staple products, the Quarter Pounder.

McDonald’s announced on Monday that it gained market share of its burger sales for the first time in five years—a victory the fast-food chain credits to its switch to fresh beef quarter-pound burgers. Last year, McDonald’s swapped out its frozen patties for fresh ones, which the company says led to an average 30% uptick in Quarter Pounder sales over the past 12 months. “That’s tremendous,” says Peri Hansen, senior client partner at Korn Ferry and a member of the firm’s Global Consumer Market. “These big systems are challenged to keep a consumer engaged, so this is really a new success story.”

The switch to fresh beef was a massive undertaking for McDonald’s—and a costly one. The world’s largest fast-food restaurant poured more than $60 million into its investment, which called for a complete overhaul of its supply chain.

Distribution trucks needed new temperature-monitoring systems; suppliers needed more refrigeration, as well as new processing and packing equipment; kitchens needed to be outfitted with utensils for handling fresh meat; and hundreds of thousands of McDonald’s employees needed training in food-safety protocols. And that happened all in order to make fresh beef patties a reality at nearly 18,000 McDonald’s locations across the country.

The move was a bold decision, says Hansen, one that required buy-in from a lot of stakeholders. “If you don’t have a relationship of trust and respect, it can be very difficult to convince a franchisee to implement those changes,” she says. “You have to prove the long-term value of that investment.”

And prove it McDonald’s did. According to the company, sales of the Quarter Pounder spiked by more than 50% during the first month of its national rollout, which happened in May 2018. What’s more, the burger giant sold 40 million more quarter-pound burgers in the first quarter of 2018 than it did in the first quarter of last year. Now they’re in a neck-to-neck burger race with rival Wendy’s, which stakes its business on the “fresh, never frozen” brand.

More and more, food transparency is becoming important to consumers, who are turning to small brands like Shake Shack and Five Guys. If other fast-food chains want to survive in this oversaturated market, then they need to notice what McDonald’s has achieved, says Dave Rossi, senior client partner and lead of Korn Ferry’s Global Industrial Manufacturing Advisory practice. “This is an economic decision,” he says. “If consumer preference has switched to where the fresh products are winning in the marketplace, there will not be a choice.” Quick-service restaurants, he says, will either make similar moves or wind up with an erosion of market share and margin.

The success of the fresh beef Quarter Pounder is also a critical lesson for suppliers, says Tyler Howells, managing associate with Korn Ferry’s Agribusiness practice in North America. In order to pull off such a massive transformation, suppliers need to stay agile and be quick to adapt to change—two qualities critical in today’s shifting and uncertain business landscape.

More so, he adds, suppliers need to be able to anticipate the future so that, rather than reacting to supply-chain transformations, they can have a seat at the table and work in partnership with clients to drive solutions. “These suppliers need to understand where the consumer is going and what the consumer trends are,” says Howells. “They have to stay on top of what’s going on so they can be competitive.”