Herman Melville's Profile
On the surface, it appears very odd that McDonald’s doesn’t offer a veggie burger. In fact, conversion of only a few percentage points of would-be buyers of a beef sandwich to a veggie burger would be a dramatic impact given the numbers you cite above. However, reality is far different. In areas where individuals are more likely to purchase veggie burgers (urban areas), there is an abundance of more palatable alternatives nearby. Second, in 2011, when McDonalds launched a veggie burger, they sold only “4 per day” according to then-CEO Don Johnson. That said, they recently launched a McVeggie in Finland on a trial basis (perhaps customer tastes have shifted enough in the last 6 years).
In a broader context, I believe that McDonalds needs to first fix their supply chain (orient towards sustainability) before moving towards customer education. It would be an odd play to attack the environmental sustainability of a leading product they offer. Rather they should adjust their supply chain and then use an environmental angle as an attack on the competition (as a 2.5% consumer of EU beef they can set a trend from a position of superiority).
A really interesting extension of this is the potential Amazon has to reduce the cost of drugs for the American consumer. If they set up e-pharmacies and contract with generic drug makers, the next step is to partner with branded manufactures. Then, a lot of the volume and rebate discounts that are being held by intermediaries and plan sponsors could be passed back to the consumer.
Consider as well, the impact to the small businessman: 80% of independent pharmacies are in towns with fewer than 50,000 residents. Amazon would almost certainly spell their demise.
Great article. I would propose that the cities which are in most dire need of “smart solutions” and gains in efficiency are least poised to adopt these sorts of changes from a political/psychological perspective. Consider India, home to 27 cities with over 1 million people. Recently, the Prime Minister commissioned the “smart city” program, where 100 cities are nominated and develop smart solutions to infrastructure problems with global leaders in IT (Cisco, Accenture, IBM, etc.). $15B have been pledged to the program. However, in some cities, local (low-income) pushback has been dramatic. How, they ask, can the government worry about train S&D optimization when for several weeks in the summer, many neighborhoods are impossible to traverse due to the effects of monsoon-driven flooding? How can IT solutions be pursued when physical infrastructure still fails so many?
It’s hard to argue that Starbucks hasn’t meaningfully contributed to the 2x coffee consumption increase over the last 30 years – to deny this would be to deny their success. I find their recent adoption of a green, pro-sustainability message to be a barely-disguised attempt to set up a barrier to entry for competitors. How can a company, with extremely lax procurement policies be seen as a beacon of the green movement in the industry. For example, in 2016, they promised to “pursue” zero net deforestation across their supply chain. This only means that they will continue to partner who clears forests, and offset the guilt by planting trees elsewhere (not even coffee). As someone who has worked on high-quality Arabica plantations in Jamaica and also seen the standards of Starbucks-driven Robusta plantations in Brazil.. they are tremendously far from “green”. We should demand that the driver of coffee consumption of the last several decades adopt true standards.
I think a key question is around the long-term viability of top-line growth in the food industry. More efficient practices will only increase yield so much (how much waste currently exists in the process? capped at 100%), and land is a fixed input, with output per acre decreasing as we move to more sustainable processes. Then, if we assume that price increases as supply of meat decreases (augmented by increased demand levied by a larger consumer base), and only high-income consumers can afford meat, where do consumption dollars go? If plant-based substitutes are less expensive and higher-efficiency, does this mean the average share of household income spent on food decreases, implying that revenues for food producers will go down over time?