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The Story Behind McDonald's Quarter Pounder Comeback
By: Fast Company
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A cryptic missive went out Last spring to all 3.6 million people who follow McDonald’s on Twitter. The tweet read, simply: “100% Fresh Beef + John Goodman = ASMR(ish)” and included a link to a video. In the split-screen clip, the Big Lebowski and Roseanne star stares into the camera and—somewhat unnervingly—whispers a carnal ode to the fast-food giant’s Quarter Pounder burger, accompanied by the sounds and visuals of an appetizing-looking patty sizzling on the grill. “Hey, you,” Goodman murmurs intently. “McDonald’s new fresh-beef Quarter Pounder is hotter and juicier. It’ll leave you speech-less. I can almost feel that juice sizzling. . . . Oh baby, the melted cheese is hugging every corner of that grilled patty. . . . That cheese is so hot, so melty.”

ASMR videos, named for autonomous sensory meridian response, typically star carefully primped young wo­men tapping on objects and whispering into high-end microphones with the intent of creating a pleasant frisson in viewers, whereas this one featured a large man waxing near pornographically about a burger. But the spot was a viral hit, quickly racking up more than 3 million views. It was timed to the arrival—at every one of the restaurant chain’s 14,000 U.S. outposts—of fresh, never-frozen beef patties in its signature Quarter Pounder burgers, a change that execs say has been as seismic for the company as the introduction of all-day breakfast, in 2015, or even the drive-through window, which McDonald’s began experimenting with in 1975. (The new patty is also available in the chain’s more premium Signature Crafted Recipes line of burgers, but not yet in Big Macs or its basic ones.)

Over the course of interviews with five top executives, I never once heard anyone mention Shake Shack (110 U.S. locations) or In-N-Out (334 restaurants) by name, but McDonald’s has clearly been studying these chains—both of which serve fresh beef—along with their millennial customers who don’t find frozen patties appetizing. “We were hearing from consumers that our burger wasn’t good enough, and we’ve seen a lot of trends around expectations of high quality,” says the company’s new chief marketing officer, Morgan Flatley, who arrived at McDonald’s from PepsiCo a year ago. “To be able to deliver that at the speed and scale of McDonald’s was a unique opportunity for us,” she says.

Fresh beef is just one element of a massive transformation underway at McDonald’s. Steve Easterbrook—a McDonald’s veteran who had also run British casual-dining chains PizzaExpress and Wagamama—was elevated in 2015 from chief brand officer to CEO at a time of real crisis. The chain had been suffering losses for six straight quarters, with net income down 15% from the year before. The iconic billions served signs didn’t quite start rolling backward, but between 2012 and 2016, McDonald’s forfeited a stunning 500 million transactions in the U.S., both to its typical competitors and a new wave of fast-casual spots like Shake Shack and Sweetgreen. “We’d lost a meaningful connection with customers,” says Easterbrook, who sounds a bit like a younger Michael Caine. “They weren’t excited about what we were doing, and that would be fairly universal on a global basis. So we rallied around a turnaround plan.” McDonald’s stock is up 60% since Easterbrook took over, but it has listed downward for much of 2018 as same-store U.S. sales growth has cooled from 4.5% to 3%. Consumers and investors alike are demanding more.

Now the company and its franchisees—owner-operators who typically sign a 20-year agreement for each restaurant and control more than 90% of the U.S. chain—are embarking upon its biggest innovation test in years with the rollout of the new Quarter Pounders. Can a company that’s famous for its predictability succeed in selling a fresh-beef hamburger—with all the logistical and food-safety risks that entails—at the scale, speed, and price its customers expect?

 

The brand-new headquarters of McDonald’s, a nine-story open-plan office tower, are in the rising Chicago neighborhood of the West Loop. From 1971 until this past June, the company operated out of a park-like campus in suburban Oak Brook, Illinois, 20 miles outside of the city. Now it’s on a stretch of West Randolph Street that is currently Chicago’s hottest restaurant row. “We felt like it would get us closer to our customers, closer to the competition, closer to the trends that are shaping society,” says Easterbrook. Plus, he notes, it’s good for recruiting: “The talent tends to be living downtown.” The young corporate employees toting Sweetgreen bags back across the street to their office during a recent lunch hour—because who can eat McDonald’s every day?—demonstrate that Easterbrook’s plan is already taking hold. Several told me excitedly about the expanded lunch options the new HQ will provide.

The McDonald’s café in the lobby of the building has one feature you won’t find anywhere else: a rotating selection of regional items from outposts around the world, including a spicy-chicken sandwich from Hong Kong. The limited availability of these items has turned out to be a canny marketing move, sparking a flood of social media interest and press coverage, but the space is also, clearly, a test lab. Menu chief Linda VanGosen, who joined McDonald’s from Starbucks last year, works closely with chefs and food scientists at McDonald’s suppliers and keeps a close eye on food trends, which have to reach a certain level of mass appeal to make sense for McDonald’s. She and her team also conduct ethnographic research, including shadowing customers to see how McDonald’s fits into their lives, and take what VanGosen refers to as food safaris, eating their way across America. “If we want to find great coffee, we’ll probably go to the West Coast,” she says. “For burgers, it’s probably somewhere in the South.”

A key insight she’s learned is that what consumers say they want, and what they actually buy, are two different things, which presents an interesting challenge. “That’s kind of the secret sauce,” VanGosen says. “What’s an emotional need you can answer?”

The company had been receiving consistent feedback from a wide range of consumers in recent years—both via focus groups and from unsolicited comments—that its beef patty, the cornerstone of its business, was subpar. But figuring out exactly what customers found unsatisfying took time. Eventually, McDonald’s determined that the burger was too dry and didn’t arrive hot enough, and executives discerned that the culprit in both cases was the flash-freezing process the patties had been subjected to. “We looked at a lot of things—raw material, fat content, grind—for the right taste and textural elements,” VanGosen says, noting that this work began well before her arrival.

They found that the patty itself didn’t have to change, just the way it was handled. Keeping the meat fresh and cooking each burger to order improves the eating experience immensely. “The game changer turned out to be serving it hot off the grill,” she says, adding that the never-frozen patties cook in 60 to 80 seconds—about a minute faster than frozen ones—which also helps offset the added time it takes restaurant workers to start cooking each burger as soon as it’s ordered. McDonald’s declines to reveal the costs associated with the new patty, beyond saying that it is not appreciably more expensive to produce than the frozen version, and that consumers won’t see an increase in price. “I haven’t seen data on this, but if I had to guess based on other restaurants, I’d say it costs McDonald’s a little more,” says industry analyst Mark Kalinowski, of Kalinowski Equity Research. “But we’re getting a lot of evidence that they are selling well.” Kalinowski says that the average McDonald’s does twice the business of an average Burger King or Wendy’s. (Wendy’s, which has long served never-frozen patties, recently took the opportunity to mock its bigger competitor on Twitter: “Hey @McDonalds, heard the news. Happy #NationalFrozenFoodDay to you for all the frozen beef that’s sticking around in your cheeseburgers.”)

McDonald’s began testing fresh-beef Quarter Pounders nearly two years ago at restaurants in Tulsa, Oklahoma, and Dallas, markets selected because they are serious burger country. The response was conclusive: More than 90% of customers distinctly preferred the new burger. It’s been a hit with critics too. “The meat was tender, it tasted fresh and delicious, with that classic whiff of black pepper McDonald’s uses,” said one Food & Wine review. “To boot, there was a nice bit of char around the edges. Simply put, there was no disguising the fact that this meat is a fairly significant upgrade from McDonald’s as usual.”


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This article was published on Fast Company. A link to the original piece appears after the post. www.fastcompany.com
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