A funny thing happened when McDonald's Corp (NYSE:MCD) introduced its artisan burger in Ireland this summer. Dubbed the McMor, the burger included Irish beef and gourmet ingredients like Ballymaloe relish and Charleville cheddar. But Irish authorities quickly clamped down on the limited time offer. The Food Safety Authority of Ireland ruled that the burger was not in fact artisan, and stripped McDonald's of the exclusive title. The Emerald Isle has strict definitions on commonly used food marketing terms like artisan, farmhouse, natural, and traditional, and told Mickey D's that "artisan" applies to a product made in limited quantities by skilled craftspeople, a definition that flies in the face of McDonald's fast food, automated model. McDonald's quickly apologized for the mistake and retracted the term.
Celebrity chef Anthony Bourdain heaped on the criticism, telling the Daily Meal that McDonald's use of the word "artisan" cheapens it, and that it undermines real artisans "who make beautiful things."
Though the move won't have any effect on McDonald's bottom line, it underscores the challenges the company faces in transitioning into a "modern, progressive burger company," as CEO Steve Easterbrook likes to say.
The beginnings of a turnaround
After the stock pop following McDonald's most recent earnings report, the company seems to be taking its first steps back toward stable growth. Global comparable sales were up 4%, thanks in part to lapping the food safety scare in China a year ago, and U.S. comps increased 0.9%, hitting a positive number for the first time in two years.
Under Easterbrook's new leadership, McDonald's seems focused on driving a two-pronged strategy of premium and value offerings for the customer. With its well-received rollout of its all-day breakfast, reformulating its Egg McMuffin recipe to the original version, and the upcoming introduction of 2-for-$2 value menu, McDonald's seems to be hitting its stride on the value front. On the premium side, Easterbrook touted the success of the new buttermilk crispy chicken sandwich, but other updates, including the Create Your Taste/TasteCrafted menu, remain in the works, and could be risky for the company.
Many analysts have questioned McDonald's ability to go upscale, and The Daily Meal Editor Joanna Fantozzi believes McDonald's would be better off sticking with its strengths, saying that using labels like "artisan" was confusing for its brand and its target audience, who are mostly looking for a tasty, cheap meal fast.
The fast casual conundrum
It's obvious why chains like McDonald's want to go upscale with customizable burgers and "artisan" sandwiches. Fast casual brands like Chipotle Mexican Grill and Panera Bread are growing as fast as they can, while chains like Five Guys and Shake Shack are raising the burger bar across the country.
But legacy fast food chains haven't had the best results when trying to go upscale. Yum! Brands' (NYSE:YUM) Taco Bell recently shut down its U.S. Taco Co. outlet, an pilot upscale taco shop in Huntington Beach, Calif., after just a year in business, and its Cantina Bell menu has failed to be the Chipotle killer that many, including famed hedge fund manager David Einhorn, thought it would be.
Meanwhile, Wendy's (NASDAQ:WEN) natural-cut fries, which it introduced in 2011, have been attacked for being unnatural, including artificial ingredients like autolyzed yeast extract and dextrose, which are found in many traditional fast food menu items.
Easterbrook seems to understand that McDonald's best chances at growing sales and profits again are leading with its strengths, offering tasty food delivered fast at easy-to-stomach prices. McDonald's has long been the leader in breakfast, which also has the benefit of being an area that the fast casual chains have mostly avoided. Adding all-day breakfast was a smart business move, and it's been a winner with customers, as has bringing back the classic Egg McMuffin recipe. The 2-for-$2 menu should drive incremental sales as well. The company also seems to be making the right moves in food quality with its decisions to ban antibiotics in its chickens and use only cage-free eggs.
As for going full fast-casual with the Create Your Taste menu, that remains a risky bet -- but for now McDonald's looks poised to recapture the value mantle it has long held, and that is the biggest key to returning to growth.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
McDonald's Aims to Take a Bite Out of Waste
The company has set a bold new goal, but some may not like the timeline.
Why McDonald's Stock Gained 41.4% in 2017
McDonald's hasn't looked this good in years.
McDonald's Corporation Earnings: What to Watch
Mark your calendar. Later this month, investors will look for McDonald's to keep up its strong momentum.