McDonald's v.p. highlights baking's role in products

by Josh Sosland
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CHICAGO — "Baking is the star," when it comes to new products at McDonald’s, said Bob Marshall, a vice-president at McDonalds’ Corp., Oak Brook, Ill.

Mr. Marshall spoke Sept. 11 at the 2009 Long Co. annual conference at the Peninsula hotel in Chicago.

"When you look at snack wraps, our new Angus products, and McGriddles, baking has been the star with the most successful new products at McDonald’s," Mr. Marshall said. "There are many exciting things happening, and baking will remain the star."

Data supporting importance of baked foods to McDonald’s were compelling. In addition to more than 500 million bagels per year, Mr. Marshall said McDonald’s currently sells 612 million biscuits, 512 million McGriddles, 500 million fruit pies and 465 million dozen buns each year. Sixteen different baking companies currently supply McDonald’s.

The optimism expressed about baking and successful products may have seemed far-fetched earlier in the decade. Mr. Marshall acknowledged that the company was "not in great shape" in 2001.

With investments in external concepts such as Chipotle and Boston Market, he said the company had lost focus. Mr. Marshall credited the company’s late chief executive officer James Cantalupo for developing a three-year "plan to win" that put the company back on a positive course. He noted that same-store sales figures have grown consistently for several years.

Beyond the importance of focus, Mr. Marshall said the company remains committed to the strength of its "three-legged stool" concept, an idea first conceived by founder Ray Kroc to describe the importance the company placed on franchisees and suppliers, together with the role of the company itself.

"All three participate fully in the annual planning process," Mr. Marshall said, noting that the process is very transparent.

"We don’t change suppliers often," Mr. Marshall said, showing a slide of a number of baking companies that have been long-term suppliers of McDonald’s. These relationships are maintained even though McDonald’s, as a strict policy, does not sign contracts with its suppliers.

Mr. Marshall said this approach — committed but without contracts —toward its suppliers may have its roots in an early handshake relationship with Louis Kuchuris, the founder of East Balt, Inc., a bun supplier to McDonald’s.

Mr. Marshall shared with the Long Co. audience colorful anecdotes from the first days of McDonald’s describing how Mr. Kuchuris helped Mr. Kroc, who was struggling in his efforts to establish the business.

The role suppliers play in helping McDonald’s continually improve its products was emphasized by Mr. Marshall. Emblematic of the company’s attitude toward continuous improvement was the evolution of the biscuit. First developed many years ago, the initial product "tasted great but was a disaster," Mr. Marshall said. The problem was coordinating daily scratch baking at thousands of outlets was completely impractical.

He credited Bama Pie Co., Tulsa, Okla., with developing the first ready-to-serve product and then Ralcorp Frozen Bakery Products with improving the product further, an example of what Mr. Marshall called "coopetition."

The company continues to convene a bakery council of its baking suppliers "to work to get better," Mr. Marshall said. He described McDonald’s approach toward buying baked foods as focused on "value rather than price" while adding that assuredness of supply also is a key.

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