Will mad cows kill the Big Mac?

Will mad cows kill the Big Mac?
Daryl Lindsey (Salon News)

With strict safety measures and new menu options, McDonald's is acting fast
to stem losses from disease in Europe, and bracing for a beef scare in the U.S.

March 26, 2001 | WASHINGTON -- Ronald McDonald sat in his Oak Brook, Ill.,
headquarters in a mental fog. He could barely move, save for a few spastic
convulsions. His brain was wasted. The outsize clown and burger peddler was
suffering from what flummoxed health experts like to call "Alzheimer's on
fast forward." In fact, he was North America's first diagnosed case of
bovine spongiform encephalopathy.

When, earlier this month, McDonald's announced an earnings shortfall, it
became clear that the disease which has plagued the global economy for the
past decade had finally hit Americans. It had hamburgled them where it
hurts most: in their pocketbooks.

"Effectively, most of the European market for beef is gone," says Harvard
University professor James L. Watson, who studies food and culture and
edited a book about McDonald's international expansion
efforts.

Mad cow disease and, more recently, the outbreak of foot-and-mouth disease
across Europe have exacted a staggering toll on McDonald's bottom line,
cutting into profits and also paring off billions and billions of dollars
from the global giant's stock
value.

Not a single case of Creutzfeldt-Jakob disease, the human form of BSE (also
called mad cow disease) has been linked to the Big Mac. But the recent beef
scares have apparently been enough to send Germans and French fleeing to
their nearest kebab stands. European sales at McDonald's in January and
February fell by 10 percent, no small amount considering the company
derives as much as 36 percent of its overall operating income from the
continent. The news was greeted with tears on Wall Street, and the stock
quickly fell to its lowest in three years -- at $27.55 a share, the price
was almost half of its all-time peak of $50 in 1999.

In a statement announcing the hit mad cow had taken on the company,
McDonald's CEO Jack Greenberg wrote March 14, "The effect of consumer
concerns regarding the European beef supply has persisted longer than we
expected, despite the fact that McDonald's overall safety and quality
standards lead the industry and provide the benchmark for safe food around
the world."

Those venerated arches have been buckling under the intense pressure of a
collapsing beef market in Europe. All those nightly newscasts of massive
cattle burnings didn't do much to drive hamburger sales. In France alone,
beef sales have plummeted 40 percent since BSE hit the mainland of the
continent. The European Union's commissioner for agriculture, Franz
Fischler, recently told the German daily the Frankfurter Allgemeine
Zeitung, "BSE is the biggest crisis that European farming has ever had to
face. It drastically changed the prospects for the farming market that we
envisioned in 1999." As one of Europe's largest beef resellers, McDonald's
has been hit in its core there. It's also forcing a company that has been
associated with burgers and fries since the opening of its first store in
1955 in Des Plaines, Ill., to reckon with a new reality: The future of its
staple product, the hamburger, is increasingly
imperiled.

For a while now, McDonald's has been marketing non-beef products like
Chicken McNuggets or McRib sandwiches. It has also marketed vegetarian
products, like Veggie Macs, in New York and Amsterdam. In London, it sells
the McChicken Korma Naan, a nod to the local Indian and Pakistani
populations. In India, where cows are sacred and beef eating is taboo, the
lamb meat Maharaja Mac tempts local appetites. Now the beef scare is
forcing McDonald's to fast-track the mainstreaming of these products -- and
its future may depend on it.

Visit the Golden Arches on Paris' Champs-Elysees or in Berlin's sprawling
new Potsdamer Platz technopolis and you'll see that changes in the product
lineup are already being made. Rather than focusing on the fare that's kept
the Illinois company's profits humming for half a century, beef is
conspicuously downplayed on the special offers, extra value meals and the
restaurant menu boards. Instead, the company is promoting its chicken and
pork products, like the McRib and the newly introduced McToast, a sort of
down-market ham and cheese croque-monsieur for the on-the-go set.

To gauge the magnitude of this burger culture shift, just try to imagine
John Travolta's Vincent Vega character in "Pulp Fiction," who offers a
sentimental tribute to the Hamburger Royal (they don't have Quarter
Pounders in Europe; they use the metric system, after all) in the film,
reminiscing fondly about a ham sandwich. While analysts see this latest
beef crisis as only a passing problem, others, especially academics and
journalists studying fast food, suggest that our hallowed symbol of the
square American meal is on its way to the circular file.

Already, increased awareness of the beef scare in the U.S. has forced
McDonald's to change some of its practices. Days after the company
announced its earnings shortfall, it also tried to assuage public fears
about BSE or foot-and-mouth infecting the livestock it uses to make Big
Macs here in the states. The company announced on March 14 that it would
begin carefully auditing beef from all of its suppliers -- from the
sprawling feedlots and the abattoirs all the way to the fryer at your local
McDonald's -- to ensure the beef was used only from suppliers that adhere
to federal regulations banning the use of ruminant meat or bone meal in
livestock feed. That material can include the brain and spinal cord matter,
which are believed to harbor BSE. Feeding such matter back to livestock is
believed to have caused the spread of mad cow disease in
Europe.

McDonald's gave its suppliers a deadline of April 1 to provide
documentation that their cattle hadn't been fed with meat and bone meal
from cattle or other ruminants. This came after the FDA banned the use of
mammal proteins in livestock feed in 1997, but those standards have been
ignored by many cattle ranchers.

The day the steps were announced, McDonald's spokesman Walt Riker told the
Wall Street Journal, "We could do better from a prevention standpoint.
Because of the [mad-cow] issue in Europe, we thought it was absolutely
prudent and common sense to say, 'Let's look to see if anything needs to be
tightened up.'"

The company also said it would create a blue-ribbon committee of doctors,
scientists and other experts to find ways to eliminate the risk of mad cow
disease in McDonald's products.

Time after time, U.S. officials have stated that regulations here will
prevent the introduction of mad cow disease in the U.S., only to be
discredited by embarrassing revelations, the
latest of which was news in January that feed manufacturer Purina had
shipped the wrong meal to a Texas ranch. As a result 1,222 cattle were fed
banned meat and bone meal. The cattle were quarantined and ultimately
tested negative for BSE. But the embarrassing news only got worse when an
investigation by the FDA showed widespread noncompliance with the regulation.

The scary news led to a crackdown and tougher enforcement -- both by
government regulators and companies like McDonald's, which stand to lose
the most if foot-and-mouth or BSE is ever discovered in the United States.
According to a report in the Wall Street Journal, McDonald's convened a
meeting on Dec. 18, over a month before the Texas incident, to determine
whether its suppliers were adhering to federal standards.

In some respects, these scares have been overly hyped. The United States
moved very early to keep BSE from coming to these shores. It banned the
import of beef and other ruminants from the United Kingdom in 1989; it
banned imports from continental Europe in 1997, following outbreaks
there.

But the new auditing procedures, no doubt, were also influenced by
frighteningly close call McDonald's had in Italy earlier this year. In
January, cows were discovered at the
Italian meat processor Cremonini that were suspected of being infected with
BSE. The announcement shook McDonald's foundations, since Cremonini is the
company's exclusive supplier of hamburger patties in Italy. The company
quickly announced that there were no cattle earmarked for Big Macs at the
plant where the suspected cases were found. But the fact that the scare hit
close to home demonstrated how important it is for companies like
McDonald's to be able to determine the provenance of the food products they
sell.

"The problem has always been with ground beef," says journalist Nicols Fox,
author of "Spoiled: Why Our Food Is Making Us Sick and What We Can Do About
It." "One has the potential of including those infectious bits of the cow,
and that's why McDonald's has taken this proactive stance, as you noticed
last week."

"How do you know what's in a hamburger?" she asks. "There's something
called 'mechanically recovered meat' and that's a serious, serious problem.
It can have spinal cord in it, and that's the infectious part with regard
to mad cow disease. People are going to look a little more suspiciously at
hamburger, at least in Europe. I don't think most Americans have any idea
about recovered meat," she says.

If McDonald's rapid response was a public relations move, it was also proof
of lessons learned from previous health crises, such as the E. coli
outbreak of 1982, when tainted beef at McDonald's restaurants caused
outbreaks of the illness in Oregon and Michigan. According to author Eric
Schlosser's "Fast Food Nation," McDonald's kept mum about its role in the
outbreak at the time. He notes that the closest the company came to
acknowledging its role was the admission by a company spokesman of "the
possibility of a statistical association between a small number of diarrhea
cases in two small towns and our restaurants."

But as author Fox documented in her book "Spoiled," the company was the
culprit of the outbreak. Years on, after the 1993 outbreak of E. coli at
Jack in the Box restaurants in Seattle, the cumulative number of deaths in
the U.S. relating to that beef-borne disease have been greater than the
number of deaths attributed to mad cow disease in Europe. And yet, our
confidence in beef here is nowhere near as shaken.

Fox says the E. coli outbreak did little to hurt the public perception of
McDonald's. "Almost no one knows McDonald's was associated with E. coli.
There were news reports in 1982 that lasted a day." But it did serve as a
wake-up call, and Fox says the company moved quietly and quickly to
eliminate the problem. "They were among the first to make certain that
their meat met a bacterial standard. They instituted changes in the way
they cooked beef that were extremely helpful in making certain that they
didn't have problems with undercooked burgers. Other companies didn't
follow suit fast enough," she says, pointing
back to the Jack in the Box catastrophe.

Fox believes fast-food hamburger became a significantly safer product as a
result of the scares. "I always tell people that hamburgers from the
fast-food places are probably safer than ones you make at home -- in terms
of bacteria."

The proactive stateside move, made despite the fact that there has been no
documented case of mad cow disease in the U.S., is indicative of a recent
trend at McDonald's, which has changed its product and marketing practices
in American and other markets as a result of health concerns and
environmental controversies in Europe. The company's move to ban the
purchase of genetically modified foods, like Monsanto New Leaf potatoes,
for its french fries came as a result of fears that massive consumer
protests in Europe, where the debate over biotechnology burns much hotter
than here, might spread to the U.S. As a global company, it is able to
detect problems with incredible speed and then make
tweaks to the system in other countries to avoid the replication of
controversies or risks that could adversely impact its market.

"McDonald's has a very good, strong management system," says Harvard
professor Watson, who edited the book "Golden Arches East: McDonald's in
East Asia." "These people are very good and very responsive to global
issues. It's characteristic for them to move rapidly. Not only to respond
to the genetically modified food fright in Britain. They were among the
very first corporations to move in that direction. More recently, they were
also among the first to reassure their clientele in Europe about the beef
they provide."

Watson praises McDonald's swift and forthright response to BSE. "They've
learned from the mistakes the British government made by trying to
stonewall and trying to ignore it. They operate very quickly for the
obvious reason that the managers in the European markets are local
people."

Watson also sees a link here to globalism. "McDonald's and GMOs and the mad
cow scare are all part of a package of how these issues have become global.
Food is the next big global issue, and meat and the exchange of meat is
what it's all going to be centered on. Mad cow disease is becoming a
disease of global trade. Of course, the American Department of Agriculture
and the cattle industry is working very hard to be certain it doesn't hit
here," Watson says.

But are they doing enough? Though there has not been a single physical
outbreak of mad cow disease in the United States, awareness of the lethal
pathogen is growing as a result of increasing media scrutiny. "I don't
think that most Americans think that mad cow disease is here or that
foot-and-mouth disease is here, but they've begun to get a bit queasy,"
says Fox. "McDonald's is very aware that either one of these could come
here. There's no fence around America that's going to keep them out. We
have globalized trade, and trade is a pathway for pathogens. Every single
day there are millions of things and people going in and out of this
country. How long can we keep these illnesses out? The Europeans understand
this better than we do."

Thanks to intensive industrial farming, Fox expects, "We're going to have
more and more of these problems. Sometimes I feel like a hunter-gatherer
trying to find something good to eat," she
says.

There's a growing rift between business analysts and academics and
journalists over how long the current beef scare will last. Most analysts
believe the worst may be over, and that sales will return in Europe as soon
as the most recent crises pass. But academics and journalists who have
studied the fast-food and livestock industries believe there will be a
long-term trend away from hamburger and other beef products that will force
McDonald's and other fast food chains to reinvent their
menus.

Part of this has to do with increasingly sophisticated palates here in the
United States. Another aspect is the growing concern about the safety of
beef -- a trend neatly illustrated by the recent success of "Fast Food
Nation," a carefully reported tome that offers a damning portrait of the
fast food industry reminiscent of Sinclair Lewis' "The
Jungle."

Some analysts are skeptical about whether McDonald's responsive marketing
can get Americans to shake the deeply ingrained taste they have for beef.
"It is wise for everyone to
explore ways to reduce their reliance on beef, but when you think of
McDonald's, what do you think about? Burger, fries and Coke," says Allan
Hickok, a Minneapolis analyst with U.S. Bancorp Piper Jaffray who tracks
McDonald's. "When I think, Honey, let's go out for a salad, I don't think
of McDonald's. You're going to be bucking 40 years of educating the
consumer as to what they're all about. The bottom line is that we don't
know much about BSE. McDonald's and everybody else can attempt to do all
they want, but if we have a case of BSE here, all bets are off. The same
things will happen here that happened in Europe because the disease is so
grisly."

But academics expect that efforts made by McDonald's to change its image
from burger-flipper to diversified restaurant will pay off as the public
increasingly looks for alternatives to beef. Harvard's Watson, who tends to
wear the hat of a food futurist, says, "It's likely to have a much longer
effect than many market analysts are giving it credit for. We're now
entering a new phase in global dietary change, where beef and other kinds
of meats are going to be increasingly perceived as too dangerous to
consume.

"You and I are too young to see this coming," he predicts. "By the end of
the 22nd century, there's going to be a real dichotomy between meat-eating
cultures and those that have
effectively gone beyond meat-eating or into something else altogether. As
our meat processing becomes more and more industrialized and vulnerable to
problems such as mad cow disease and all sorts of other things, you're
going to have increasing moves in this direction," Watson
argues.

Peering even deeper into the crystal ball, Watson sees a future where a
McDonald's hamburger or beef of any sort will be roughly analogous to the
consumption of pufferfish in Japan. Despite highly trained chefs who are
masters at cutting out the toxic portions of that delicacy, there are still
several deaths stemming from the dish in Japan each year. "I suspect that
probably not within too many more decades, meat will be perceived by some
cultures in the same way."

Thus, 50 years down the road, toddlers may scream for Veggie Mac Happy
Meals rather than burgers and fries. And it won't be any kind of green
movement that gets us there, but rather a neo-pragmatism about food safety.
Cheers

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