How McDonald’s Is Turning ‘Unhealthy’ Food Into a Healthy Stock Price

Laura Shin

Posted on May 11, 2012

McDonald’s.

The name conjures up images of golden arches, Ronald McDonald, Happy Meals … and Super Size Me, pink slime, heart disease and the obesity epidemic.

So maybe those last few are only tangentially related to McDonald’s. But the company’s image as the paragon of fast food means that every negative thing associated with burgers, fries and a drive-thru also sticks to McDonald’s as stubbornly as a spot of grease on polyester.

Given that, you would think that Big Macs would be in decline in a country that counts yoga and Whole Foods among the most popular trends of the last decade.

But precisely the opposite is true.

McDonald’s is killing it on a number of measures of financial success. It’s crushing its competitors, and sales have increased in the last four years, recession be damned. And the company is only beginning work on a major renovation. Read on to find out how McDonald’s is reinventing itself for a more health-conscious age and whether it will ever shed its low-brow, unhealthy, fast food image.

Hundreds of Billions Served—and Made

The 2004 documentary “Super Size Me,” in which filmmaker Morgan Spurlock ate only McDonald’s food for 30 days, was (and remains) a huge blot on the company’s image. Spurlock gained almost 25 pounds on the McDonald’s diet, saw his cholesterol skyrocket and experienced sexual dysfunction and depression. One of the film’s most memorable scenes showed Spurlock hurling after finishing a meal just two days into his new diet.

But talk about being super-sized: The movie barely made a dent in McDonald’s hold on America, which is still huge in every way, according to these numbers in The New York Times Magazine:

• McDonald’s owns almost 17% of the U.S.’s “limited-service” restaurants, in which customers pay before eating.
• It’s as big as the next four competitors in that space–Subway, Starbucks, Burger King and Wendy’s–combined.
• It’s even done well in the Great Recession: In 2011, sales over the previous year were double the industry’s projected growth rate, and the average McDonald’s had increased its sales 13% since 2008.
• In the last five years, its stock price has nearly doubled to $92 as of this writing.

How did the chain recover from what could have been a public relations disaster, and how is it revamping for a more health-conscious era?

How the Golden Arches Have Gone Green

Its Literal Image

First, with a budget of more than $1 billion, the company is redecorating its stores to make them feel more like Starbucks and less like, well, McDonald’s.

As USA Today put it, “Goodbye, fiberglass tables and industrial steel chairs. Adios, neon-yellow, bright-red interiors. Hello, wooden tables, comfortable faux leather chairs and interiors newly painted in muted oranges, yellows and even subtle greens.”

So far, the 3,000 redesigned stores are raking it in: The Times magazine reports, “On average, these restaurants experience 6 to 7 percent sales growth over the market’s increase, according to McDonald’s.”

Selling Healthier Food

For the first time last year, McDonald’s sold more pounds of chicken than pounds of beef, which the Times magazine likens to Starbuck selling more tea than coffee. The company is also adding apple slices to every Happy Meal and slimming down a portion size of fries. In addition to appealing to more health-conscious consumers, the revamped offerings are adding to the company’s coffers: Menu newcomers like smoothies and espresso drinks slurp in $9 billion a year.

An Unlikely Weapon

With a more than $2 billion estimated advertising budget, you would think McDonald’s has done all it can to get positive PR. But no.

The company is courting mom bloggers and flew several to Chicago with their families, putting them up in hotels, giving them tours of the company’s Oak Brook, Illinois, headquarters and getting professional shots of their kids with Ronald. Loralee Choate, a Utah-based mom blogger described the experience:  “There was just a great deal of care taken with my family. I did not have one expense. They even took into consideration that I was two hours away from the airport, so they sent a car to take me. It was very, very gracious of them.”

The blog posts written recounting the free trip were overwhelmingly positive.

McD’s Story Isn’t Over

While all these efforts are certainly bearing financial fruit for the company, it may never entirely shed its reputation as the easy fast food punching bag.

In January, the company launched a Twitter campaign featuring company advertisements showing the farmers who farm the potatoes that get sliced into McDonald’s fries, or who raise the cattle that become Big Macs. The ads, publicized on Twitter with the hashtag #MeetTheFarmers, were meant to show that McDonald’s food is real food, from the earth.

The second phase of the campaign, intended to encourage people to keep talking about the farmers, featured the hashtag #McDStories. It quickly went awry for the company, with Twitter users coming up with these quips:

– #McDStories I lost 50lbs in 6 months after I quit working and eating at McDonald’s (viaThe Daily Mail)

– Ate a McFish and vomited 1 hour later….The last time I got McDonald’s was seriously 18 years ago in college….. #McDstories (via Twitter)

Alas, despite its size, or because of its size, McDonald’s is still the biggest recipient of fast food pot shots.

Whether McDonald’s will always be considered the preeminent packager of industrialized food or whether redesigned stores, revamped menus and carefully wooed mom bloggers will make a difference remains to be seen.

One thing is certain: The super-sized company will be around for a while.

photo: camerabee/Flickr