March 1, 2007
By Maria Pilar Clark and Dan Malovany
McDonald’s USA strengthens its position as the undisputed leader in the foodservice industry by focusing on the portable snacking occasion that’s driving traffic throughout the entire day.
So many times, innovation is the offspring of creative problem solving. It’s also the birthchild for creating new opportunities.
Take McDonald’s USA’s wildly successful Snack Wrap, one of the chain’s most successful new product launches over the last year.
Initially, chef Dan Coudreaut, director of culinary innovation, and his team had been challenged to discover unique ways to use the McDonald’s Chicken Selects in new menu items.
Seeing the trend toward bolder flavors and the burgeoning Hispanic market, using a tortilla seemed like a logical first step in creating something that’s fresh, interesting and different. In addition, because more than 60% of McDonald’s business is done through the drive-thru, Coudreaut and his staff wanted to develop a convenient, portable, easy snacking option that accommodates America’s on-the-go lifestyle.
“My culinary team was playing with wraps and wanted to make [the Snack Wrap] hand held, add value and make it operationally feasible to serve in restaurant and through the drive-thru,” Coudreaut recalls.
Simplicity, too, played a large role in determining which ingredients were in and which were out. According to Coudreaut, ranch dressing was selected because it’s the No. 1-rated flavor profile among U.S. consumers. Natural, mild shredded cheese and lettuce make for a comforting way to eat the whole item. It was just a matter of taking ingredients already in McDonald’s kitchens and creating something unique using “old favorites,” he adds. “Our guests demand quality food at the speed they have come to expect” from McDonald’s.
“It’s easy for the guest,” he explains. “It also builds upon the idea of built-in variety. All I would have to do is change out the sauce or the cheese, and I’ve got a new flavor profile.”
That’s exactly what McDonald’s did this year. In January, the Oak Brook, Ill.-based company introduced the Honey Mustard Snack Wrap. For health-conscious customers, the company now offers a grilled alternative, in addition to a crispy offering.
“A major trend is health and wellness, which is a mega-trend that isn’t going anywhere,” Coudreaut notes. “It’s getting bigger and bigger, and I think there is a sub-trend in health and wellness, which is the presence of positives and the absence of negatives. In the 1980s, it was no fat and no carb and no salt, and I think we’re starting to see a reversal in that, with people asking, ‘What is in a product that is actually good for me?’”
The Snack Wrap is just one of many new items that McDonald’s is developing for the snacking or the “in-between” meal occasion. Other items include the Snack Size Fruit & Walnut Salad, Apple Dippers, Fruit ’n Yogurt Parfait and Cinnamon Melts, which roll out nationwide in March.
Danya Proud, spokesperson for McDonald’s USA, notes that the new menu items are part of an ongoing effort to provide customers more menu choices and variety, and offer them a value throughout the day, especially during non-peak hours.
“Convenience is the key,” she says, “Convenience and portability speak to the whole snacking occasion. Since a lot of people want to eat handheld items, they want something that’s portable and really ready to eat on the go, just like the Snack Wrap.”
Striking a Balance
According to Jerry Smiley, a partner at Strategic Growth Partners in Roselle, Ill., McDonald’s is performing so well these days with rising same-store sales and increasing profitability because it has gone back to fundamentals.
“I think it is because they have refocused on their core, namely menu, customers and operations,” says Smiley, whose company tracks foodservice trends.
The Snack Wrap, he adds, “is a great example of providing a balance of great tasting and, yet, not-so-bad-for-you items. It follows the Premium Salads and other items that provide alternatives to those who would otherwise avoid McDonald’s.”
Although it’s known for its Big Macs, Quarter Pounders, French fries and Egg McMuffins, McDonald’s strategy to develop snackable items fits in nicely with what Smiley calls “mealpart creep,” where consumer-defined meal times are less significant or do not exist.
“These items are providing non-lunch opportunities, especially in the late morning or mid-afternoon,” he says.
Overall, McDonald’s USA is the nation’s leading foodservice retailer, with more than 13,700 U.S.-based restaurants in 21 regions throughout the country, serving millions of hungry hamburger hounds around the clock.
In addition to rolling out new snack items, new $1 breakfast item promotions and other strategies are helping the company remain relevant to its customers’ changing needs.
Coudreaut notes, for example, that McDonald’s Asian Salad has really made his culinary team focus on what was being brought to the consumer’s table in terms of nutrition and caloric value, and making the product better.
“We chose almonds instead of crispy noodles or wontons for the salad, because even though those made perfectly good sense and the consumer understood them, it was adding empty calories to a pretty healthful salad,” he says. “So, we chose almonds, because it’s the presence of a positive nutrient versus something that’s not.”
It takes anywhere from 18 to 24 months for a new product to debut on a national level at McDonald’s restaurants. New ideas can come from management, owner/operators, the culinary team or simply from a dream in the middle of the night. However, each is fully explored and then backed by leading consumer research regarding the latest major foodservice trends and, frankly, what consumers want to see in their local McDonald’s restaurants.
“We’re in charge of bringing that idea to life,” Coudreaut. notes.
In a nutshell, new product ideas go from the culinary team to the company’s menu management and marketing team, which provides feedback. From there, it’s a long road before the product reaches a test market, as corporate team members, owner/operators and suppliers weigh-in on the idea, tweak it, discuss its marketability and map out whether supplying it on a national scale is a practical and attainable objective.
“Ultimately, it has to be a menu item that customers will purchase from McDonald’s — at a value that is right for the customer and for the restaurant,” Coudreaut says. “That’s not to say that we’re not going to keep pushing the envelope in terms of ingredients on new products or new flavor profiles, but where we can say that our current ingredients are wrapped up in a different way that we haven’t though of before, like the Snack Wrap, which the consumers love and that the owner/operators love, and that also applies to current trends, then it’s one of those nice all around wins.”
Partnership for Quality
To maintain its position as a leader in the foodservice industry, McDonald’s follows a distinctive business philosophy known to insiders as the “Three-Legged Stool.” The idea behind this image is that the company, its suppliers and its owner/operators collaborate and work together as each leg of the stool toward the ongoing success of the company overall.
“It’s very unique to McDonald’s,” says Ken Brems, product director, supply chain, at McDonald’s USA. “It was a philosophical approach that [company founder] Ray Kroc had, in that we should really share the accountabilities as well as the successes of the system.”
The Three-Legged Stool is easy to follow and, according to Brems, has enhanced and consolidated the quick-service chain’s operating and supply chain practices for the past 52 years.
“Different people should do different things,” he says. “People who manufacture and supply should be accountable for the supply. People who run the restaurants should be accountable for the success of the restaurants. The company should be accountable for guiding the restaurants and owner/operators and leading them to where they should be and making them grow. But it’s everyone’s responsibility to keep the wheels in motion. It’s not a static process.”
Understanding the teamwork shown between each leg of the stool must promote and lead to the same end result — success — the most important part of the model.
“If one of those legs isn’t successful, it’s going to wobble, fall and collapse,” Brems notes. “So it raises the notion that suppliers need to be equally accountable for a piece of the success, but that they also need to gain rewards based on that.
“That philosophy is what has really grown the McDonald’s/supplier relationship that we have,” he adds. “All three legs of the stool are like that, throughout the entire system. The suppliers all work together, and we have councils, they work with the owner/operators toward the success of the restaurants, and they work with us to ensure more success, and likewise.”
McDonald’s promotes the sharing of ideas and technology within its network of suppliers to ensure the ongoing success among the three partners and uphold its stringent food quality and efficient operating standards.
“They really do work together,” Brems says. “People from one company will have people from another company to talk about a product or see if some equipment can be used to make something better, and there’s no holds barred. Everyone shares information in order to further the success of the brand.”
So close is the working relationship between suppliers, owner/operators and the company, that, according to Brems, should a plant operator encounter a problem, someone else from McDonald’s supply chain won’t waste time waiting in the wings, but will immediately be ready to assist where necessary.
“It’s really remarkable,” he says. “If one of our bakers has a problem, be it equipment related or whatever else, one of the other bakers will fly down an engineer to work with him and make sure he gets up to speed.”
Making the Bun
To bolster its philosophy of collaboration, McDonald’s has groups in place such as a bun-focused bakery council, which meets three to four times a year and is comprised of bun suppliers from its 10 principle operating companies.
During its meetings, company officials, bakers and owner/operators discuss everything from the quality of this year’s wheat crop to current operational or formulation-based challenges facing the baking industry to the fluctuating costs of sugar and flour. In addition, opportunities for new product development and product quality evaluations are discussed in depth, and the council conducts down-and-dirty “blind” bun evaluations, product cuttings and even grades buns by following a strict set of criteria.
“All around the table will be the bakers from all of these different companies evaluating all of the buns in addition to their own,” Brems notes. “It’s really fun to see, because these are bakery experts and they challenge the density of the bun, the grain and the color, and they don’t know who they’re grading because it’s all done as a blind taste test. They could be grading their own and they get score sheets, and they all see the results at the end. It’s a great way to calibrate.”
The strategy behind the council’s evaluations and scoring is to reach its goal and ultimate target — the gold standard bun. But that’s not the council’s main challenge. That real challenge comes afterward when the bakers return to their own home bakeries.
“It’s in seeing if they can produce that same bun on a day-to-day basis,” Brems says. “You have to have a concept of what this target looks like, so the head of the quality division of each bakery will be briefed on what the target is, and they go back and adjust it to fit their own operations.
“And it’s not just about the buns,” he adds. “When they’re all finished, they make up Quarter Pounders with cheese and hamburgers and cheeseburgers because the consumer isn’t just buying the bun. They need to get an idea of the whole sandwich and how it fits together.”
McDonald’s not only ensures that its suppliers participate in every possible aspect of the baking process, but that they also end up knowing as much about the processes as they do the buns themselves.
“They don’t just supply the bun,” Brems asserts. “They supply a component to the sandwich, and they really look at it that way.”
Baking As a Science
Consistency is another key component in creating and maintaining McDonald’s world-famous menu. The fast-food mogul is continuously improving its operations to ensure that product is uniform throughout all its restaurants.
“You can’t go into a restaurant in Boise, Idaho, and then one in Orlando, Fla., and one in Chicago and have the products be different,” Proud says. “The expectation of the customer is that no matter where they go, it’s going to be the same quality product. So it’s really important that there’s no compromise.”
McDonald’s has come a long way over the years in terms of fine-tuning its statistical product controls programs and measuring its production systems and quality, along with implementing Hazard Analysis Critical Control Points (HACCP) programs.
“It all works so well that it really has become a science,” Brems says. “There’s a saying that baking is an art and not a science, but we’re making it a science.”
Combining the art of new product development with operational excellence, McDonald’s is proving to both its customers and competitors that it has truly set the gold standard when it comes to providing excellent in the foodservice industry.
The Fresh Maker
McDonald’s baked goods account for a significant percentage of its fresh market business, so fresh product is delivered by bakery vehicles on a daily basis, with the rest being filtered through its distribution network. Ten baking companies, which operate 21 baking facilities, make up McDonald’s supply chain, which produces the company’s “regulars,” including buns for Quarter Pounders and Big Macs, English muffins, and Premium Chicken Sandwich rolls. Three suppliers comprise the company’s bagel supply network, and biscuits come from two suppliers.
McGriddles — breakfast sandwiches made with maple syrup-flavored “griddle cakes,” with sausage, egg and cheese, or bacon, egg and cheese — are among the chain’s relatively new products and are supplied by three companies who operate four plants.
“That product was a pretty big undertaking and has been a great success because we identified the need for another handheld breakfast sandwich, and while we knew what we were looking for, there was no equipment out there that could actually produce it,” says Danya Proud, spokesperson for McDonald’s USA.
Adds Ken Brems, product director, for McDonalds’ supply chain: “It’s not just thinking of a new product and selling it right away. First, we have to make sure that we have the technology and equipment to make that product and figuring out if we’ll be able to produce more quickly and at our quality standards. There literally are tons of ideas in the pipeline, so you can’t just keep putting new ideas into practice.”
Meeting McDonald’s stringent quality standards is tough, and only the cream of the crop, in terms of suppliers, can keep up with the company’s frenetic, but, ultimately, successful pace.
“Being the bun guy, I can say that our quality is far superior to that that you would find in a lot of other places,” Brems says “It’s just in the ingredients and the care that the suppliers put into the buns, and they produce just an outstanding product.”
Tulsa, Okla.-based Bama Cos., Inc., which produces apple pies and other products for the chain has been the recipient of McDonald’s USA’s Highest Quality Award that, according to Brems, “was really an assessment of all of their quality systems, they excel at it. ”
“It’s a culture at Bama,” he notes. “They’ve done a great job at measuring quality systems throughout all of their processes and they have it down to a science. That’s a high benchmark.”
As the company diversifies its menu offerings, McDonald’s is adding new suppliers to its network. However, joining the McDonald’s team isn’t easy.
Suppliers are expected to be as demanding as the company when it comes to ingredient purchases, quality standards, codes of conduct and efficiency, and constantly striving to produce an even better product is a well-known rule of thumb.
“Not a day goes by in which some sort of dialogue doesn’t take place about existing processes,” Proud notes. “We’re McDonald’s, and we expect the best.”