Economy First Look

Can fresh beef save McDonald's? (+video)

The quarter pounder is getting a revamp, but analysts are not convinced it will be enough to stem a steep decline in foot traffic at the Golden Arches.

McDonald's says it will swap frozen beef patties for fresh ones in its Quarter Pounder burgers (shown here in a promotional image) by sometime in 2018 at most of its US locations.
Courtesy of McDonald’s Corporation/AP
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In a bid to reverse a steep decline in customer traffic, McDonald's will begin serving fresh beef, instead of frozen, in its Quarter Pounder hamburger at most restaurants by 2018.

While it’s not yet clear how it will affect the fast food giant’s bottom line, business analyst view the move as a response to long-time rival Wendy’s “fresh never frozen” motto, which has been a big draw for customers.

The move is part of a host of menu and ingredients substitutions made by The Golden Arches in recent years, which has lost around 500 million transactions since 2012, due in part to a public shift away from processed foods, as people increasingly seek fresher alternatives.

McDonald's initially switched to frozen beef in 1973 to keep up with customer demand as it expanded rapidly across the nation.

"They're trying to get people to give them another shot," Trip Miller, managing partner at Gullane Capital Partners, which holds 20,000 McDonald's shares, told Reuters.

But whether McDonald’s switch to fresh beef will be a success is still up in the air. The move will require workers, who are used to cooking frozen beef, to learn how to safely handle and cook fresh meat, and may slow down service, analysts say. They are not yet sure how using fresh meat would affect profit margins. Many suggested it wouldn’t have as strong a draw as the switch to all-day breakfasts.

Diners "say they want fresh and healthier, but they want it faster than ever," Mr. Miller said.

The beef switch-up is part of a broader turnaround plan launched by chief executive Steve Easterbrook in the past few years in an attempt to lure customers back.

Chains in the United States have swapped butter for margarine in Egg McMuffins, stopped buying chicken meat from birds raised with antibiotics, and removed high-fructose corn syrup from many of its buns.

However, the latest switch, to fresh beef, is currently only for the Quarter Pounder. Other burgers will continue to be made from frozen patties, although they could go fresh later on.

“Today’s announcement is part of a continuing food journey for McDonald’s,” said Chris Kempczinski, president of McDonald's USA, in a press release announcing the move.  “Over the last two years, we have accelerated the pace of change around how we source and serve our food. We’re just getting started, and can’t wait to show you what’s next.”

But the announcement also drew criticism, some in jest, from competitors and customers on social media.

Wendy's ribbed its bigger rival on Twitter: "@McDonald's So you'll still use frozen beef in MOST of your burgers in ALL of your restaurants? Asking for a friend."

So far, fresh-beef Quarter Pounders tested in 400 restaurants in Dallas and Tulsa, Okla., saw customers order more of those burgers and visit the restaurant more often, according to Mr. Kempczinski

The Oak Brook, Ill.-based company said the revamped quarter pounders will be available by the middle of 2018 at most of its 14,000 US restaurants. Alaska, Hawaii, and some airports won’t be making the switch.

This report contains material from the Associated Press and Reuters.