Mcdonalds coffee ingredients pork

BECG/017

IBS Center for Management Research

The McDonald’s ‘Beef Fries’ Controversy

This case was written by A.Mukund, IBS Center for Management Research. It was compiled from published sources, and is

intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a

management situation.

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 2002, IBS Center for Management Research. All rights reserved.

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BECG/017

The McDonald’s ‘Beef Fries’ Controversy

“Hindus and vegetarians all over the world feel shocked and betrayed by McDonald's deception

and ultimate greed.”

- Attorney Harish Bharti, on filing the lawsuit against McDonald’s, in May 2001.

“These are the ways the fries are made in the US, and we don’t have any plans to change.”

- Walt Riker, McDonald’s spokesperson, in May 2001.

A CONTROVERSY ERUPTS

In May 2001, a class action lawsuit 1 was filed against the world‘s largest fast-food chain

McDonald‘s, in Seattle, US. The lawsuit alleged that the company had, for over a decade, duped

vegetarian customers into eating French fries 2 that contained beef extracts. The lawsuit followed a

spate of media reports detailing how the French fries served at McDonald‘s were falsely promoted

as being ‗100% vegetarian.‘

Although McDonald‘s initially declined to comment on the issue, the company issued a

‗conditional apology,‘ admitting to using beef flavoring in the fries. The furore over the matter

seemed to be settling down, when to McDonald‘s horror, some of its restaurants in India were

vandalized. Activists of Hindu fundamentalist groups – the Shiv Sena, the Vishwa Hindu Parishad

(VHP) and the Bajrang Dal, staged a demonstration in front of the McDonald‘s head office in

Delhi protesting the alleged use of beef flavouring. They submitted a memorandum to the Prime

Minister, demanding the closure of all McDonald‘s outlets in the country.

Activists also staged protests in front of McDonald‘s restaurants in south Mumbai and Thane.

Mobs ransacked the outlet at Thane, broke the glass panes and smeared the McDonald‘s mascot

Ronald with cow dung. About 30 people were arrested and later let off on bail. Company officials

estimated the loss to the outlet at Rs 2 million.

Officials at McDonald‘s India quickly announced that the vegetarian products served in India did

not have any non-vegetarian content (Refer Exhibit I for details). However, despite this

reassurance, the anti-McDonald‘s wave refused to die down.

Meanwhile, more cases were being filed against McDonald‘s – this time in California, US and

Canada. It seemed certain that the company would have to shell out millions of dollars to

settle the class action lawsuit representing the 1 million US based Hindus and 15 million other

vegetarians.

1 A class-action suit is a suit filed to protect the interests of group of individuals who are affected or may

be affected by a perceived fraud or misconduct of a similar nature. The number of people could be as few

as under 10 to millions. Typically, class action suits in the US drag on for years and very often parties

settle out of court within the first year of filing. 2 Thinly sliced, finger-sized pieces of potato, deep fried and served with a sprinkling of salt.

The McDonald’s ‘Beef Fries’ Controversy

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BACKGROUND NOTE

McDonald‘s was started as a drive-in restaurant by two brothers, Richard and Maurice McDonald in California, US in the year 1937. The business, which was generating $ 200,000 per annum in the 1940s, got a further boost with the emergence of a revolutionary new concept called ‗self-service.‘ The brothers designed their kitchen for mass production with assembly line procedures. Prices were kept low. Speed, service and cleanliness became the critical success factors of the business. By mid-1950s, the restaurant‘s revenues reached $ 350,000. As word of their success spread, franchisees started showing interest. However, the franchising system failed because the McDonald brothers observed very transparent business practices. As a consequence, they encouraged imitators who copied their business practices and emerged as competitors. The franchisees also did not maintain the same standards for cleanliness, customer service and product uniformity.