McDonald's woes offer warnings for the grocery industry

Ever since Morgan Spurlock gorged on a McDiet of Big Macs, Whoppers and fries for 30 days, turning before our eyes into a somewhat podgier version of his former self, the Sword of McDamocles feels like it’s been hanging over McDonald’s.

The reaction to the 2004 movie reflected a consumer trend that has only grown more persistent in the decade that’s followed. Beware the hidden health implications of cheap, processed foods.

It’s no surprise, then, that the sword has fallen on the fast food chain’s profits. Sales were down $5.9 billion in the first quarter of 2015, and hundreds of outlets now face closure, chief financial officer Kevin Orzan announced last week.

The global chain has already closed 220 restaurants in the first three months of this year, in addition to 350 planned closures, according to a report from The Independent.

And with consumers developing a taste for ridding their diets of every chemical-sounding ingredient and murky manufacturing process, it’s hard to see how the fast food chain can recapture its former glory without serious action.

This same growing suspicion of large scale food industry practices has trickled down to the grocery sector too. Take the overwhelming public reaction to Joanna Blythman’s food industry exposé ‘Swallow This’ in February, which was lovingly serialised in several major newspapers.

Her tales of preservative filled muffins sitting unchanged on desks for months, meat pumped full of water, and salads washed in chlorine resonated strongly with consumers already primed to mistrust the sector. The health-concious consumer is driving unrivalled growth in areas such as free-from and low-sugar, and not all companies or retailers have been fast to react.

Holland & Barrett have attempted to capitalise by launching a free-from concept store, and reports suggest there were half a billion pounds in sales of the products last year.

The other thorn in McDonald’s profits is that consumers are simply becoming a little more adventurous, and less in thrall to the status quo. Where once a single behemoth dominated the industry, now we see competitors springing up in every corner, much like Tesco’s faltering grip over the grocery market. 

A flood of US chains are making their way to the UK, holding McDonald’s profits over a hot grill, and throwing our whole notion of a burger on its head.

Smashburger, famed for its technique of ‘smashing’ balls of Scottish Angus beef on butter covered grills, announced just last week it would be opening two UK outlets by Christmas with more to follow. It’ll join the likes of Five Guys, MEATliquor, and Burger & Lobster in taking what used to be considered a fast, budget meal sincerely upmarket.

To some extent McDonalds have cottoned on, launching their own 100% sirloin steak burgers earlier this year at a higher price point. Similarly, Tesco is fighting its new competitors, the discounters, by sticking to sensible and consistent low prices on its staples.

As for McDonalds, though, with a 75-year history built around ‘sell ‘em cheap, and stack ‘em high’ it’s going to take a lot more than a few upmarket products to shift the brand image that’s doing them so much harm.