July 26, 2016 Chain Of Plenty

Volume 3 | Issue 2

Built on the strength of a supply chain that runs so efficiently it is nearly invisible, McDonald’s® feeds the world. Its McGriddles® breakf

Place two pancakes, sausage and eggs on a plate and you have a great American breakfast. Make the cakes into a sandwich and place sausage, bacon and eggs in the middle and then brand it with the Golden Arches and you still have a great American breakfast … but now you have it McDonald’s style.

The sandwich is called McGriddles and its evolution from concept to menu item illustrates the finesse with which McDonald’s has grown its supply chain in the last 50-plus years, making it a substantial and dynamic part of the company’s culture. From handshakes with McDonald’s founder Ray Kroc to multi-layered agreements, the company’s suppliers have grown together and expanded into an integrated force that has shaped McDonald’s and served as a standard through which others operate.

Indeed, so much effort goes into fostering these relationships that McDonald’s suppliers consider themselves to be one and the same with the brand. “Our supply chain is built on mutual respect; we’re interested in long term relationships to help us build a stronger system,” notes J.C. Gonzalez-Mendez, senior vice president of supply chain management, McDonald’s North America. Suppliers, he adds, “constantly refer to themselves as being part of the McDonald’s brand.” The philosophy under which McDonald’s operates its supply chain is known throughout the company as the three-legged stool, encompassing franchisees, corporate staff and suppliers on a never-ending quest for excellence – like a chain that never breaks and, indeed, works so well it appears to be nearly non-existent. As Gonzalez-Mendez attests: “The greatest compliment we can receive is that our supply chain is an invisible entity.”

And so, the strength of that chain solidly in place, six years ago McDonald’s set about to once again change the way Americans eat breakfast.

McGriddles: The Idea

In a way, McDonald’s can thank the automobile and the advent of working women for the change in Americans’ eating habits that led to the invention of menu items that affect the way Americans eat today.

It started when the car expanded into a mobile dining room, which forced a new way of eating and sparked a whole new way to deliver food that traditionally had been spread out on a plate, meant to be eaten at a table. This, melded into the advent of more women entering the workforce 35 years ago, spawned the need for convenience foods. These factors may have precipitated the invention of the Egg McMuffin® in 1971, which marked the first time McDonald’s reinvented the classic American breakfast. The book, Grinding It Out: The Making of McDonald’s, notes that Herb Peterson, and his assistant Donald Greadel, the operator of their Santa Barbara franchise, asked Ray Kroc to look at something, not telling him what it was because it was “…a crazy idea – a breakfast sandwich.” In effect, the advent of the Egg McMuffin opened up a whole new area of potential business for McDonald’s: the breakfast trade.

In the same vein, McDonald’s began discussions a few years ago that centered on bringing to America another breakfast staple in the form of a sandwich. “We said, ‘Wouldn’t it be great to have a sandwich that resembles a hot cake and sausage – a true American breakfast classic,” Gonzalez-Mendez recalls, adding that McDonald’s wanted something handheld because a great deal of the company’s business – roughly 65 percent – comes through its drive-thru. Any time there is a discussion about introducing a new menu item, the aim is to develop a wholesome, quality, portable product at a value that only McDonald’s can offer, the executive said. So, the word went out among corporate staff, franchisees and suppliers that the world was ready for a new innovation in breakfast.

Problem: Eggs and bacon and sausage are easily placed on an English muffin to make a portable meal. How do you do that with pancakes and sausage – and keep all that maple syrup from oozing out?

Well, one supplier had the answer.

A golden opportunity

C.H. Guenther, headquartered in San Antonio, Texas, had reached a milestone in 2001, celebrating its 150th anniversary officially making it the oldest family-owned business in Texas, and the oldest continuously operated, family-owned milling company in the United States. During that century and a half, the company made a name for itself producing the highest quality baking and gravy products, including biscuit, pancake and gravy mixes.

The company was about to hit another milestone. While Guenther was not a supplier to McDonald’s, representatives nonetheless attended a breakfast summit held by the company in 1998, whereupon McDonald’s asked vendors for ideas on expanding the breakfast menu, recounts Mike Toti, vice president of corporate accounts. “We did a lot of development work and came up with a waffle stick with syrup built in,” Toti says. But after introducing the idea to the McDonald’s management team, the company discovered McDonald’s had its sights set on reinventing pancakes and sausage, with maple flavoring that would be as rich and savory as maple syrup.

Guenther was ready to rise to the challenge through an innovative technology that allowed the company to inject fruit flavoring into its nuggets for use in mixes and baked products. Why not leverage that capability to inject maple flavoring into pancakes?

“We made the molds and the first version was a rectangle that we referred to as hand cakes,” Toti remembers. “But the thinking was, if you’re going to use a pancake, it should be round.” And then, Guenther went one step further, taking the initiative to stamp the pancake with the famous Golden Arches and took their sample to one of McDonald’s chefs. The result was a “very high level” of interest, Toti recalls. From that point the sandwich became the subject of more meetings among McDonald’s corporate staff, franchisees and suppliers to determine how to produce such a product on a massive scale and still achieve a high level of taste and consistency.

And so, having come this far, with a new and exciting breakfast item in place, McDonald’s and Guenther then had to devise the equipment to cook it on.

“There was no piece of equipment in the world that could make a McGriddles with maple syrup flavoring injected into it,” explains Lisa Frick, director of menu management and project lead for McGriddles. That particular technology was not available, which meant the ability to produce the breakfast sandwich on a massive scale would take another year to 18 months. The key was to suspend the maple flavoring in the pancake while it was being baked and still maintain the necessary quality. Through the entire process, Frick adds, suppliers and franchisees worked closely with McDonald’s staff to bring the McGriddles to market. Across-the-board consistency and quality were critical – whether in Des Moines or New York City – the company needed every sandwich sold at every location to have the same great level of taste and consistent quality.

Eventually, McGriddles was put to an advertised sales test at 400 McDonald’s restaurants, which enabled the company to test customer response, as well as operational efficiencies in the test restaurants in Wisconsin, Illinois and Mississippi in mid-2001 and then in Arkansas, Southern California and Tennessee. Of course, right out of the gate, the response to this newest innovation was phenomenal. And another trend in breakfast eating was born.

In 2002, Guenther hit its second milestone: The company along with two other suppliers were awarded the McGriddles business.

“We held a McGriddles summit and invited other suppliers into our facility,” Toti recalls. “The goal was to achieve a consistent quality product across the three suppliers.” And the experience of being a part of the McDonald’s family was both rewarding and enlightening, he adds.

“Given that we were a new supplier to the McDonald’s system, we had no experience with the supply chain team to draw from,” he says. “Throughout the process, we had the opportunity to work with many members of the supply chain team and the experience was terrific. Their team leaned on us for expertise related to the product while teaching us about the importance of assuring supply for the McDonald’s system. The end result was a very successful new product launch that drove incremental sales for the system.”

The Final Link

From the customer side, Frick adds, “It took a while to figure out what to call it.” Early monikers included dough cakes or pancake sandwiches. Another hurdle lay in describing to customers exactly what these were, she explains. “We had to assure people through messaging that the sandwich wouldn’t be messy. Through the whole development process we worked with suppliers and franchisees to make sure everyone understood exactly what we were after,” she notes.

Indeed, explains Gonzalez-Mendez, bringing the McGriddles to market involved the combined efforts of suppliers, staff and owner-operators, a tight relationship that has allowed McDonald’s to continually achieve success. Being the day-to-day executors of the plan, the franchisees supplied the last critical link in the chain and perhaps no one knows the importance of this better than Gonzalez-Mendez: He started his McDonald’s career in 1984 as the first employee for McDonald’s Mexico where he was responsible for developing the sources of supply for McDonald’s first restaurant in Mexico City in 1985. The McGriddles, he adds, underwent extensive flavor profiling, which entailed a great deal of testing and retesting at the restaurant level.

Richard Schmitt, McDonald’s owner/operator, along with his brother, Edward, own 11 restaurants in the Aurora, Ill., area. As chairman of McDonald’s food improvement team Schmitt remembers how that test played out. “I tested it in the early stages over a year before it was rolled out nationally,” he recalls. Promotions entailed posting a “ceiling dangler” in the counter area and also a bigger sign at the drive-thrus. “People still didn’t have any idea what it was,” he remembers. “You could see it was similar to a hotcake but the size wasn’t the same. Customers didn’t really have a good perception of the product.” At one point, Schmitt handed out samples to customers, which very rapidly helped McGriddles to catch on, with minimal advertising. “When the testing period ended customers really wanted the product; they liked it so much they wanted to write McDonald’s and tell them how good it was.”

But among the many factors that had to be addressed were the ease in putting McGriddles together – specifically, how much time would be required to make it – as well as the product’s relationship to the rest of the breakfast menu. Would McGriddles balance out the menu? Erode sales from other products?

“When McGriddles was rolled out nationally we found it actually contributed to a revitalization of McDonald’s,” says Schmitt, who started with McDonald’s in 1979 as a restaurant crew member. “McGriddles is a unique product – none of our competitors had this – and it became another iconic type product. Sales were robust; breakfast was re-energized and it contributed to customers’ perceptions of McDonald’s being more relevant to them.”

Toti agrees. “The McGriddles launch was clearly a win for all parties, the owner/operators, the company and the suppliers – a great example of the three-legged stool at its best.”

Indeed, as Gonzalez-Mendez stresses, “The job is to put in front of the customer exactly what they want.” While all of the testing and re-testing might seem redundant, it is vital, Gonzalez-Mendez explains, to developing a premium product. “In the U.S. we serve 27 million people a day – you can’t make a mistake. We’re extremely diligent in our studies.”

Chain of success

While Gonzalez-Mendez notes that McDonald’s size is often its biggest challenge, in the same breath he adds that this size presents the company its biggest opportunities to be quick in adapting to changing consumer tastes.

“People are our greatest asset,” he adds. “Some suppliers that provided products to Ray Kroc on a handshake are still with us – it is a relationship built on trust and mutual respect.

Schmitt adds that each of the three legs on McDonald’s proverbial three-legged stool “really work together for the common good of satisfying customers’ expectations. All of our suppliers have the same goal to create a gold standard product that the customer will crave. I can’t tell you how many times a supplier has come up with a procedural change that enhances a product. They all have a vested interest in making the customer happy. We are all guardians of quality.”

“When you think of innovation you think of the iPOD or the combustible engine,” notes McDonald’s Chef Daniel Coudreaut, director of culinary innovation at McDonald’s USA. “Sometimes innovation is simpler in nature.”

Proof of this is McDonald’s new Snack Wrap – not the wheel, mind you, but a reinvention, nonetheless, of the afternoon snack. Pop a few chips in your mouth? Reach for a candy bar? Not when there’s the possibility of reaching for a Snack Wrap, a delicious way to cure late afternoon hunger pangs.

And for a company that consistently remakes our traditional notions of food, the new offering doesn’t let anyone down. Its development is further proof of the close ties McDonald’s has developed with its suppliers, underscoring its commitment to quality at every level.

“The Snack Wrap has been one of our most successful new product introductions,” notes Coudreaut, senior vice president of supply chain management, McDonald’s North America. It consists of warm crispy or grilled premium white breast chicken meat, cheddar jack cheese, fresh lettuce and ranch sauce, all wrapped in a soft flour tortilla. Following the success of this initial launch, McDonald’s created a newer version featuring honey mustard sauce and most recently, the chipotle barbeque flavor, which have both proven as popular as the original.

The beauty of the Snack Wrap launch lay in the fact that nearly every ingredient was already in use in other McDonald’s menu items: the flour tortilla in the breakfast burritos, the ranch sauce in the Ranch BLT Premium chicken sandwich, the cheddar jack cheese in the Bacon Ranch premium salad, shredded lettuce in the McChicken® and other items, and a roughly 1/2 slice of grilled chicken from the Chicken Selects® menu option. The only ingredient delivered into the restaurant just for the Snack Wrap is the honey mustard sauce.

The idea was born last year following meetings on how to enhance the Chicken Selects® menu item. “Restaurant owner/operators told McDonald’s about their concerns and asked for something that allowed them to sell more; that was the catalyst,” reports Coudreaut. “It was a nice exchange and a great example of the three legged stool: franchisees collaborating with corporate. We also wanted to find more ways to use more chicken and tap into our supplier resources. With that comes culinary expertise. We wanted to align those resources in a productive way.”

Other chefs were invited to join a brainstorming session and the entire culinary team shared ideas. They narrowed the list to the best 15-20 ideas, and then whittled that down further until the Snack Wrap came out on top.

“There’s a value side and premium side of the menu but the middle spot is where Snack Wrap comes in,” Coudreaut notes. The product also answers a new dynamic in consumer eating habits, from three square meals a day to six smaller meals. The Snack Wrap, he adds, is a great snack option for the late afternoon hours.

“Variety is a big part of our menu,” he adds. “We listen to our guests and that drives the development process. We have the right formula to make sure we offer both premium and value choices.”

Cultural change, the chef adds, is the driver that allows McDonald’s to branch out and test new products and ingredients. “It speaks to where food is going in America and allows us to build upon it.”

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