June 14th, 2006

Tarnished Arches

By Dan Thanh Dang
Baltimore Sun

Its bottom line may be as healthy as ever, but McDonald's image has been battered by those who blame the company for the country's obesity problem

For a limited time only, indeed: The days of finding Disney movie collectibles in McDonald’s Happy Meals are coming to an end this summer, a corporate parting of ways that some see as yet another blow to the Golden Arches’ once rock-solid foundation.

The end of the cross-promotional collaboration between the nation’s largest fast-food chain and the House the Mouse Built was a mutual decision, according to officials from both companies, but it comes at a time when fast-food companies are under fire in lawsuits, documentaries and books that claim they contribute to the nation’s obesity epidemic, especially among children.

“I think McDonald’s is in trouble,” says Robert Frankel, a brand expert based in Los Angeles. “Even if they win the lawsuits, books and movies like Chew on This, Super Size Me and Fast Food Nation don’t show a lot of the joys of eating there. They’ve taken major blows. McDonald’s loses in the public arena.”

And yet, the American public is notorious for contradictory behavior. Even as the McDonald’s image is taking its hits, the company’s bottom line is better than ever.

Last month, the Illinois-based restaurant giant posted 37 months of sales growth at stores open at least a year - a jump fueled by the popularity of dollar-menu items such as double cheeseburgers and fried chicken sandwiches rather than the healthier salads and fruit that McDonald’s began offering in the wake of criticism about unhealthy fare.

Officials say revenue has jumped 33 percent in four years. And McDonald’s stock price has tripled since trading in the low teens just a few years ago.

McDonald’s said promotional deals with other companies will replace the Disney collaboration after the end of the film company’s final two tie-ins - featuring characters from Cars this month and the Pirates of the Caribbean sequel next month.

“Our 10-year partnership with Disney simply ran its course,” says Walt Riker, a McDonald’s spokesman. “We’re going to continue to talk to Disney and DreamWorks. There could be future collaboration on Disney toys. ... We don’t hear from mothers who say, ‘Take away the toys.’ Toys are part of the family experience at McDonald’s.”

Pop into a local McDonald’s, and it’s easy to see why. On a recent afternoon, the PlayPlace at the restaurant in Ellicott City’s Long Gate Shopping Center is packed with smiling parents and boisterous children. The counter clerks are swamped with long lines and lunch orders. Almost every table brims with cheeseburgers, chicken McNuggets and french fries.

But it’s that kind of high-fat fare that has drawn criticism in recent years. Filmmaker Morgan Spurlock showed America the harmful effects of eating McDonald’s food every day for a month in his 2004 movie Super Size Me. A movie adaptation of Eric Schlosser’s book, Fast Food Nation, will be released in theaters this fall, and a version of the book for younger readers, called Chew on This, hit stores last month.

“Their corporate financials may look good right now, but the public stuff is really going to hurt,” Frankel says. “In the public consciousness right now, there’s as much a direct link between cigarettes and cancer as there is between obesity and fast food. It isn’t all McDonald’s fault, of course, but people are going to go after them.”

The size and scope of the McDonald’s empire has always made it an easy target over the years. Who doesn’t remember the hot-coffee lawsuit in 1992? Or the woman who sued in 2000 because she claimed an overly hot pickle fell out of her hamburger, inflicting a burn on her chin and mental suffering?

But lately, the slaps are coming from more notable critics and reaching a wider audience. After the dings from Schlosser and Spurlock, childhood-obesity experts are pointing fingers at food companies such as Coca-Cola Co., Kraft Foods Inc. and McDonald’s, saying they market unhealthy foods to kids.

More lawsuits
Last month, lawsuits filed against McDonald’s claimed that the fast-food giant misled the public by saying its french fries contained no wheat or gluten products. More obesity lawsuits are expected, experts say.

“I do think that McDonald’s is increasingly becoming radioactive,” says Gary Ruskin, executive director of Commercial Alert, an Oregon-based nonprofit critical of commercialism in schools and other public areas. Ruskin’s group is an advocate of prohibiting the marketing and sale of junk food in schools.

“It’s a sign of things to come,” Ruskin says. “Across the country, we’re seeing quite a strong movement to get junk-food marketers out of school. Across the world, we’re seeing greater alarm at marketing junk food to children. In the climate today, would McDonald’s be able to cut a deal with Teletubbies as they did years ago? I think not. Sesame Street had a deal with McDonald’s years ago, too. That kind of thing would be a much more difficult partnership now.”

Experts say McDonald’s likely will continue using Happy Meal toys as a way of attracting kids, who have a major influence on where families eat.

Charles Wilson, co-author of Chew on This, says he and Schlosser are not out to destroy McDonald’s or end all marketing that targets children. They just want McDonald’s and other fast-food companies to advertise healthier foods in the kids’ meals.

“We welcome toys with a healthy salad or fruit or something that’s not heavily processed,” Wilson says. “We give them credit for adding healthier food options, but you have to look at the fact that 98 percent of the food they sell is bad for you. People always ask us, ‘What about personal responsibility?’ That’s why we wrote the book. We want kids to know what’s in their food, where it comes from and how it’s made.”

And yet, despite the numerous anti-McDonald Web sites, despite customer-satisfaction surveys in 2001 that showed the chain was falling well behind its rivals, and despite posting in 2002 its first quarterly loss since 1954, McDonald’s has endured - and soared, in some respects.

“They have really turned their business around,” says Bob Sandelman of Sandelman & Associates, a fast-food consulting firm with headquarters in San Clemente, Calif. “They’ve responded in a couple of ways to criticism, by adding to the menu items that are perceived to be more healthy. They’ve allowed apple slices and yogurt substitutions in kids’ meals. They’ve stopped offering super-size portions.

“McDonald’s has responded proactively, I think,” Sandelman says.

For example, McDonald’s used to cook its fries in a mixture of cottonseed oil and beef tallow. In 1990, the chain switched to pure vegetable oil after critics launched an attack against the amount of cholesterol in its fries. In 2004, McDonald’s ended its super-size menu choice right before Spurlock’s movie debuted.

These days, in response to growing concerns about the obesity epidemic, McDonald’s has added a number of healthier food products to its menu, such as salads, apple slices and fruit-and-yogurt parfaits, says company spokesman Riker. The company redesigned its low-fat milk carton into a small, colorful milk jug that fits in children’s hands - boosting milk sales by 125 percent, Riker says.

There isn’t as much demand for the healthier foods, and in fact, it is the popular dollar menu, of double cheeseburgers, fries and the occasional healthy item, that has helped boost much of McDonald’s sales growth.

McDonald’s stores around the world serve 50 million customers a day, Riker says, 4 million more customers now than four years ago.

With such reach, McDonald’s has taken the lead to act more responsibly, some say.

‘Some mistakes’
“McDonald’s will continue to be on the hot seat,” says Bob Goldin, executive vice president at Chicago-based Technomic Inc., a food-industry consultant and research firm. “They’ve made some mistakes, but there is no other chain that has been as pro-active at disclosing nutritional information or introducing new menus. It’s very tough being the leader and being so visible.

“They’re everybody’s whipping boy.”

Riker says obesity is “a legitimate national issue,” but McDonald’s shouldn’t shoulder the blame for it.

“The vast majority of meals are eaten somewhere other than McDonald’s,” Riker says. “We are responsible, however, for offering quality food once they make that choice to eat at McDonald’s. In 2001 and 2002, we took our eye off our customers. When you do that, you lose your way. We paid a price for that. So long as we keep the focus on our customers and remain true to that, our business will be the better for it.”

The formula, so far, seems to be working at places like the McDonald’s in Long Gate Shopping Center.

On the same recent afternoon at the packed restaurant, many children there had jugs of 1 percent milk with their fries while parents opted for new menu items such as the fruit-and-yogurt parfait and the fruit-and-walnut salad.

While their children climbed all over the PlayPlace, Dorney Chesto Ruck and her friend Michelle Pappadia caught up with each other. The women say they visit once a week before afternoon kindergarten classes start for the kids and right after swim lessons at the YMCA across the street.

“They get french fries or cookies, but not both,” says Chesto Ruck, 40, of Ellicott City as she watched her three youngsters play. “The apple slices are nice. They never get soda. They get milk or juice. We do fast food, but I try to limit what they get.

“I don’t think there’s anything wrong with it if you’re exhausted, they’re exhausted and you swing in here to pick something up to eat,” Chesto Ruck says. “They know it’s not the norm. They know it’s a treat.”

While both women say they want to keep their children healthy, neither blames fast-food restaurants for childhood obesity.

“It’s not the fast-food restaurant’s fault if I choose to eat something unhealthy,” says Pappadia, 37, also of Ellicott City. “But I think a discussion on obesity and healthy eating always helps, and I think it will help McDonald’s change.”

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