Golden Arches Green Initiatives Will Only Help in the Long Run

McDonald’s Corporation (NYSE:MCD) is taking steps to improve its supply chain and optimizing energy consumption which could help in improving its public relations. More often than not, McDonald’s is in the news for the wrong reasons although it still continues to attract more footfalls each year. Social groups are going after large chains like McDonald’s on suppliers and renewable energy efforts. By being responsive to more socially responsible and environmentally friendly initiatives, McDonald’s and other chains are learning that it can help its bottom line and improve its image with customers.

We have a Trefis price estimate of $98 for McDonald’s, which is almost 10% above the current market price.

See our complete analysis for MCD stock here

McDonald’s Alters Its Supply Chain

McDonald’s USA announced that it will gradually phase out its pork suppliers who use gestation stalls that confine pregnant sows by 2012. The restaurant chain purchases almost 1% of the total pork produced in the U.S. ^[1] A similar initiative was announced by its rival, Wendy’s, earlier in March.

This is not the first time McDonald’s has altered its supply chain. In November 2011, the company cut ties with its (then) supplier Spargoe Egg Farms, after a footage that went viral revealed the cruel conditions at Spargoe’s facilities. McDonald’s commercial launched in December last year also focused on the brand’s ingredients and recognizes the farmers and ranchers in its chain supply. Consumers today are conscious of what they eat and demand ingredients that are natural and produced in an environmentally friendly way.

McDonald’s has also been named eleventh in the list of ‘Top 50 green-powered organizations’ by the U.S. Environmental Protection Agency (EPA). According to the report, McDonald’s used more than 30% of its electricity at its company-operated restaurants in the U.S. through the use of renewable energy. ^[2]

Restaurant chains are also under pressure to use naturally raised meat with the Food & Drug Administration (FDA) getting more serious about curbing the use of antibiotics in animal feed.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. McDonald’s to Phase Out Pork From ‘Gestation Stalls’, wsj.com, May 31,2012 [↩]
2. McDonald’s Supersizes Its Green Energy Use, earthtechling.com, May 16, 2012 [↩]