McDonald’s Supply Chain May Set Bar on Sourcing Antibiotic-Free Beef, Expert Says

In December, McDonald’s Corp. said it aims to rid its global beef supply of antibiotics, putting a new fast-food trend on the radar, and in an interview, a professor details what it takes to implement the supply chain shifts that McDonald’s is seeking and how that might affect the fast-food industry.

On its website, McDonald’s says that although the company does not raise its own animals, its supply chain includes beef and dairy cattle, pigs and chickens.

“We understand and acknowledge the significant responsibility we have to help ensure these animals experience good welfare throughout their lives. Good welfare is also necessary to guarantee high-quality products,” the company states.

In 2017, the company updated its  Global Vision for Antibiotic Stewardship in Food Animals, which aims to “preserve antibiotic effectiveness in the future through ethical practices today.”

The fast-food company cut antibiotic-fed chicken from its offerings in 2018, and professor of practice Suresh Acharya, of the University of Maryland Robert H. Smith School of Business, said the earlier push for antibiotic-free chicken was likely the first step for the company toward the more challenging process of attaining antibiotic-free beef.

Acharya specializes in designing statistical optimization solutions for supply chain management problems, merging his academic research with hands-on experience to provide insight into the best supply chain practices. (The following is an edited Q&A with him.)

What do you think inspired McDonald’s to launch the push to serve antibiotic-free beef at its fast-food locations?

From a consumer perspective, there’s a whole area that is starting to really get attention called the ethical supply chain, and it has a fairly broad umbrella around anything that is environmental or sustainability-related.

There are of course areas around the treatment of the various actors in the supply chain, whether it be animals or humans, that are getting more attention. Based on what I see, one report said that consumers are 60% more likely to eat at restaurants or are willing to pay more if they know that antibiotics are not used in those products.

Judging from those who were first on the antibiotic-free chicken side — Chipotle and Panera by and large were seen as the leaders in this, and it was fairly well-received — and then you have folks who have really fallen behind. …

It has shown that consumers are likely to open up their wallet just a bit in order to purchase healthier items because it obviously impacts public health in general.

How will McDonald’s likely have to go about implementing this change to its supply chain?

The biggest challenge is way up the supply chain, and that is when you are dealing with suppliers. The beef industry is very fragmented, so when you compare this to the chicken industry and the success of the quick roll-out that happened on the antibiotic-free poultry side, there are a handful of suppliers.

The biggest challenge is to ensure that all of the beef suppliers actually comply with the new policy. It is one thing to have them pledge and say that they will comply, but that results in the question of whether there will be an audit process and what kind of mechanisms are in place to ensure that the suppliers are living by their words. Technologies such as blockchain may be able to help both audit as well as to track violators.

What other challenges are likely on the radar of McDonald’s and its competitors in terms of this supply chain change?

The protein or meat industry’s yield predictions have been relatively stable and part of that is because of the use of some of these antibiotic treatments. Once that starts to decrease, companies may wonder: “Will I get the same out of my cow? How many of my cows will actually fall sick?”

This whole notion around yield and its potential impact on cost is a big challenge, in addition to being part of a fragmented marketplace, potentially having the need to be able to track and to audit, and then this uncertainty that this change brings about in terms of yield.

I don’t think anything needs to change drastically once you get to the distributional side: how much of what needs to get sent where for the consumption by the end consumer. I think there will be bumps on the upstream supply chain side, with the fragmented market and the need to comply and audit.

Is this something you think would inspire other companies to make the same changes?

It would have to be a trend in that after McDonald’s starts to actively tout this change, obviously they’re going to roll it out by geographies and there are going to be certain parts of the world where this is going to be very hard for them to implement initially.

In the more mature markets, once they do this they’re going to have big signs saying “No Antibiotic Beef Patties” or whatever they will say. If I’m a Burger King or Hardee’s or Arby’s; whoever I am, I have no choice but to take notice of that because I think we’re also seeing a generational interest in this.

When you look at some of the surveys, it’s really the millennials who are willing to pay extra and buy things that they perceive as being healthier, more environmentally friendly, more humane, all of that. McDonald’s will be the trendsetter, and I think everyone would essentially have to follow.