McDonald's (MCD) announcement on Tuesday to align its supply chain toward fresh, antibiotic free beef could be key to wooing younger consumers.
"Today, McDonald's is announcing a policy to reduce the overall use of antibiotics important to human health, as defined by the World Health Organization (WHO), which applies across 85% of our global beef supply chain," the company said in a press release on Tuesday.
The move marks another step in the company's overall move towards more natural food sourcing after its move to fresh beef in the first quarter of 2018, which clearly sought to capture millennials that are buying more fresh meat than all other generations combined.
Considering the company declined to follow in Wendy's (WEN) fresh beef footsteps for 49 years, something must have tipped the company's trajectory. The correlative demand from younger consumers is certainly not a farfetched connection.
Further, the antibiotic stance gives the company an opportunity to lead in a new frontier, making up for its late arrival to fresh beef.
"With the announcement of this new policy, McDonald's again demonstrates its leadership and commitment to responsible antibiotic use," Dr. Karen Hoelzer, Senior Officer at the Pew Charitable Trusts said. "Pew looks forward to seeing how McDonald's implements this policy in the months ahead."
Much has been made of the company's efforts to modernize and raise its technological profile of late and its effort to raise the brand's profile in the eyes of newer consumers. Yet, the company's move towards more natural and sustainable food sourcing policies should not be ignored, as it hits at the heart of the purchasing decisions made by younger consumers.
Millennials account for $2.45 trillion in spending power and, along with their younger counterparts in "iGen" or "Gen Z", will come to represent over 50% of the U.S. population by 2020.
The American Marketing Association notes that about 70% of millennials will spend more on brands supporting causes they care about, making social responsibility among major brands like McDonald's.
McDonald's has clearly sought to make its new, responsible status known in efforts like the one outlined today.
"We are on a journey to build a better McDonald's," the company said. "As we work in partnership with our supply chain and producer partners to address major challenges like antibiotic resistance, we'll continue to listen to our customers to make sure we're meeting and exceeding their expectations every day - from the farm to our restaurants."
Such a move could reduce the company's overall reliance on discounting, which could accelerate company margins beyond the company's already effective management since bringing locations more firmly under the corporate banner.
To be sure, suppliers dealing with a year of overhauls and personnel shortages might be overwhelmed with the swift change. For a restaurant that sells 75 hamburgers per second, even a small change is a major change. New standards for 85% of the supply chain is no small potatoes.
In the end, McDonald's appears to be playing by a classic rule of retail and restaurants. When it comes to the largest and most profitable consumer base in the country, the customer is always right.
Judging by the statistics, that could be a winning mantra for long term investors.