010155 Mad Cow Panic Shakes Golden Arches

McDonald's company profits have been hit by the mad cow panic, forcing the fast food giant to push for non-beef products. Its problems emphasize that being a global food business is becoming an increasingly tough job.

Being a global fast food company is not fun. It was bad enough to adapt the average American hamburger to every country's idiosyncratic regulations, food tastes and cultural no-nos - from kosher meat in Israel to Muslim-only restaurants in Mecca. Now come food scares and growing antiglobalization movements.

Consumers - European consumers in particular - are looking at their plates with increasing suspicion. Mad cows have created havoc across Europe, from the UK to France, Germany, Italy and Spain, and beef sales have taken a plunge. The consumer panic was bound to hit the king of beef burgers sooner or later. On January 24, McDonald's announced disappointing results for Europe, with reported operating income falling by 17% over in 2000. A weak euro was in part responsible for the fall, but the company admits: "the concern regarding the safety of the European beef supply negatively impacted this segment's results in the fourth quarter." The problem is unlikely to disappear overnight. McDonald's CEO Jack Greenberg expects the first quarter to be very challenging, in no small part due to the BSE scare.

This is no small problem for McDonald's, whose policy is to source most of its ingredients from local suppliers. In the UK, about 3.5m cattle were slaughtered when the scale of the catastrophe was uncovered. Last fall, one of the company's Italian beef suppliers spotted an infected animal in its processing facility, which sent a chill down all of Italy's beef supply spine. In France, beef sales were down by an estimated 40% after a major supermarket chain had to recall suspect beef. Last November, Germany discovered that the country's flocks were not immune to BSE either.

BSE is not a food company's only nightmare though. Over the past few years, the campaign against genetically modified food has been gaining momentum, which has translated into increasing public pressure on food processors and distributors.

What can a company do to contain a wave of public distrust? According to David Langford, head of the crisis management team at Burson Marsteller, an international public relations company, transparency and communication are everything. "There is a direct correlation between a company's openness and honesty and the ability for the brand to recover from a crisis," he says. So McDonald's has organized public campaigns attempting to convince customers that the company's strict safety and quality standards made it BSE proof.

This is all very well, but hardly enough when attempting to contain fully- fledged panic and a severe trust deficit. So McDonald's is also adapting its products to circumstances. With beef out of favor, here come chicken and pork, from ham and cheese to McRib sandwiches. The company has recently announced the launch of a New Taste Menu, to be rolled out first in the US, heavily skewed towards pork. And the company's European operation has announced its intention to phase out GM ingredients.

Having to cope with local food crises, however, is not the only cost associated with being a global food giant. McDonald's has become the overarching symbol of globalization and what is perceived as American cultural imperialism. This is hardly surprising, as the company's golden arches stretch across 120 countries around the globe, selling hamburgers in over 28,000 fast food restaurants.

With the antiglobalization backlash in full swing, this kind of visibility is hardly comfortable. In times of anti-US sentiment, the risk of consumer boycott is always looming, as was recently evident in the Middle East. Even worse, McDonald's restaurants have become a favorite target of antiglobalization protestors of all inklings, and hardly an international get-together now takes place without the local McDonald's getting trashed. As far back as 14 years ago, the opening of a branch in central Rome even inspired the creation of the Slow Food Movement, to stem the standardization of palates and promote long meals and culinary diversity. The movement now has more than 60,000 members in 35 countries, including the UK, US, France, Germany, Spain and Australia. No chance to catch that crowd gulping down a Big Mac.

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