“McDonald's believes source-verification is a key component of consumer confidence with beef and all food products,” says John Hayes, senior director of U.S. Supply Chain for McDonald's Corp.
McDonald's is the world's largest beef buyer, and purchased one billion lbs. of beef in the U.S. last year alone. The firm believes so strongly in product source-verification that it's begun to do what is usually anathema in the retail world: pay more for products that their competitors are paying less for.
Specifically, McDonald's set a 2004 goal of having at least 10% of its U.S. beef purchases verifiable for source of origin. They exceeded that goal largely because they were willing to pay for it.
“Our customers' expectations are our expectations,” says Rob Cannell, McDonald's director of U.S. Supply Chain. “Our customers today expect higher safety standards, better tasting products and companies that care about social responsibility and sustainability.”
With that in mind, Cannell explained to invited participants at the International Livestock Congress in Houston, TX, last month that McDonald's aggressive supply development of source-verified product has much to do with providing consumers with what many believe they're already buying.
“Traceability is more about assuring the consumer the meat is safe than it is about making meat safer,” Cannell says. “The concern we have is that many consumers believe effective traceability already exists for most, if not all, food products. Most would be very surprised to learn the ability to trace products back to their point of origin is limited or nonexistent in some cases.”
From packer to producer
Understand, for decades, McDonald's has been able to trace 100% of its individual hamburger patties from its stores back to the particular lot of beef at a particular packing plant. What's new, and what Cannell says many consumers already expect, is that retailers and food service purveyors can trace the product to specific cattle, and can trace those cattle to where they were produced, raised and fed.
In McDonald's case, the goal of source-verification is to know within 48 hours if a particular animal could be involved in a lot of beef purchased by them.
“Our definition of source-verification is knowing the season of birth, the farm of origin and every location of the animal between the farm and the packing house. And, this information must be auditable,” Hayes says.
While McDonald's leaves it to packers to demonstrate what records packers are requiring of suppliers to provide this assurance, Hayes emphasizes it consists of more than just a signed producer affidavit.
Incidentally, Hayes says McDonald's is not requiring use of specific ID systems, records or data management for two primary reasons. First, the company doesn't want the production industry to feel it's being forced into one cookie-cutter system or another. More important, Hayes explains, “From our standpoint, this isn't about any given program; it's about access to information. We don't want to dictate to producers a specific program.”
Keep in mind, McDonald's isn't trying to trace individual hamburgers back to individual cattle.
“This is about ID and source-verification at the packer level, and identifying, reasonably, which individual animals could be involved in a specific lot of beef. It's not about tracing animals back to the individual ranch,” Hayes says.
In other words, rather than trace cattle beyond the packinghouse for production or marketing purposes, McDonald's wants to assure consumers the products it serves can be traced back that far if necessary.
“McDonald's has no desire for traceability data. If a crisis occurs, we want to know that a chain of data describing the animal's life exists and is available to the proper authorities to take appropriate actions,” Cannell says.
For perspective on how high the stakes run with consumer confidence, Cannell points out when BSE cropped up in France 10 years ago, McDonald's lost about half its business there. Only recently has it begun to rebuild market share.
“Any loss of consumer confidence potentially affects our brand, and most probably will affect our business around the world, no matter where the problem occurs,” Cannell says.
The value of knowing source
The typically tight-lipped McDonald's isn't shying away from telling the industry it's paying for source-verification, or that it will expect — at some unspecified point in the future — all its beef to be source-verified.
“We're very keen that producers understand we're paying a premium for this because we believe it's important,” Hayes says. “We're in the process of aggressively expanding the supply of source-verified beef available to us.”
Likewise, McDonald's is being careful to help the industry understand that a premium today isn't necessarily a premium tomorrow. Over time, as source-verification evolves into a standard of doing business, Hayes expects it will be an added cost of doing business that is folded into the bill the retail consumer ultimately pays.
Hayes says there's currently no set premium for source-verification. Where it exists as the by-product of an existing program, McDonald's can secure the assurance for little or no premium. In other cases, where cattle origin is nondescript, the firm has been known to ante up plenty. Various sources in the country peg the premium at more than $30/head in some instances.
“We're trying to create an economic incentive, a pull-through environment. It's very important to us that the premium we pay to packers also reaches the producer,” Hayes says. “It's important for all of us to recognize this isn't McDonald's program. This is the consumers' program. We're investing on behalf of the consumer.”
Since this is a packer-based program, Hayes advises producers interested in marketing source-verified cattle to McDonald's to visit with their regular buyers about the possibilities.
“The consumer is becoming more interested in food, where it comes from, its nutritional value and how it was handled,” Hayes says. “We don't see this as isolated (by product or time). We view this as a much larger issue going on in the mind of the consumer. This is something we all have to come to grips with.”
Indeed, Cannell is sharing more than McDonald's viewpoint of source-verification when he says, “The rules have changed in the 21st century and we must change to survive.”