“We pay a premium today for the firewalls that we have in place on beef.”
The first rule of marketing is to know who the customers are and what they want.
In the cattle business, that’s the buyers of burger meat, because up to 60 per cent of every steer that goes down the kill chute is eventually sold as hamburger.
Out of last year’s beef crop, some 64 million pounds ended up sandwiched between two pieces of bread sold to the 2.5 million customers per day of the McDonald’s restaurant chain in Canada – the largest purchaser of ground beef in the country’s foodservice sector.
What McDonald’s wants is full traceability and bullet-proof food safety protocols that consumers can trust, says Jeff Kroll, senior vice-president in charge of the supply chain at McDonald’s Canada.
“When we talk about marketing Canadian beef to Canadians, their trust and confidence in the product underpins all other considerations when it comes to purchase behaviour,” said Kroll, who joined a four-person beef industry marketing panel discussion at the annual Manitoba Cattle Producer’s Association general meeting last month.
Since BSE was discovered in Canada’s herd in 2003, the fast-food giant has consulted with international experts and worked hard to hone its supply chain to minimize risks.
Strong relationships with supply chain stakeholders paid off earlier this year, he added, when an email hoax accused the corporation of using South American beef instead of 100 per cent Canadian product.
With industry sources willing and readily available to add credibility to McDonald’s side of the story, the rumour was quickly quashed.
“Today, we are actively involved in our management of beef, fully integrated with our suppliers, and more aligned than ever before with our industry partners,” said Kroll.
“But there’s more we can do so that our Canadian industry remains viable from producer to retailer. McDonald’s believes that a robust, national traceability system is critical to ensuring consumer confidence and building brand trust in the beef industry. Such systems require investments in time and money from each of us, but the return more than justifies the cost.”
The federal government’s commitment to a national, mandatory traceability system from the farm gate to the retailer and back by 2011 is “heartening” and the “right thing to do,” he added.
“We are all in this together, and we are only as strong as the weakest link in the supply chain, whether it’s production, processing, distribution, or retail sales. If consumer trust is broken at any point in the chain, we all suffer the consequences.”
During the question period, Joe Bouchard, outgoing president of the MCPA, asked if McDonald’s would be prepared to share some of the cost of “farm to fork” traceability.
“When we talk about food safety, a lot of people say that traceability is going to solve all of our problems. But I would like to point out that proper protocol is just as important – or maybe more important – than traceability,” he said.
“Will the consumer pay more for traceable products? Can you, or will you, charge more for your product in order to recover those costs, because traceability costs money.”
Kroll replied that McDonald’s has a “long history of paying more for products” because of the high standards that it has in place, which currently include environmental sustainability, animal welfare and food safety.
“We pay a premium today for the firewalls that we have in place on beef,” said Kroll.
Pointing to a National Farmer’s Union chart on prominent display in the meeting room, Deleauarea grain and cattle producer Ian Robson noted that beef prices have fallen to levels not seen since the Great Depression and can’t seem to get back up.
He asked Kroll what was the “appropriate level of profitability” that cattle ranchers could expect from the other elements of the food chain, such as retailers.
“What factors do you see that will raise that trend of price decline to where a basic producer will become profitable again?” said Robson. “In my estimation, we need a doubling of the current value.”
Kroll responded by saying that McDonald’s, along with Wendy’s and Burger King, operates in a competitive environment.
“Clearly, supply and demand is an element of that. Less supply – price goes up,” said Kroll. “We do believe that our suppliers need to be profitable. We need them to continue to be in a position to support us.”