McDonald's is quietly testing fresh, never-frozen beef patties. The test is small — limited to just 14 restaurants in Dallas — but it could have major implications for the future of the company, and an analyst at Nomura thinks investors are underestimating "just how seriously McDonald's is evaluating" a larger rollout.
"Should McDonald's move to fresh beef on a much more widespread basis, we believe that it would likely lead to multiple positives (such as better-tasting burgers and quicker cook times, which in turn could mean speedier customer service)," the analyst, Mark Kalinowski, wrote in a research note. "We think this has the potential to be a big, big deal."
Nomura has placed a "buy" rating on the company as a result. McDonald's CEO Steve Easterbrook said Wednesday that there wasn't currently a large enough supply of fresh beef to expand the test nationally but that the company could start expanding it gradually region by region.
"Would that supply be there right now? No it wouldn't," Easterbrook said at a conference in New York. "It doesn't mean we shouldn't start to expand it. You can go region by region ... and develop it that way. We are pretty good at solving operational supply chain issues when we have a good idea." He said a larger rollout wouldn't require any major new equipment or expenses for franchisees. The company just has a few small issues to work out through the test, such as finding the best system for storage and handling of the beef to avoid any cross-contamination of the fresh, uncooked meat with other food items.
"We are trying to figure out the best way to segregate equipment like spatulas and scrapers for the grill," he said. But if there's enough enthusiasm for the fresh beef patties among customers, a rapid rollout isn't out of the question. "When there is a ground swell of enthusiasm and the operators are aligned behind it and the company is helping support that, suppliers have stepped up in an unbelievable way to deliver both the equipment and also the ingredients," Easterbrook said. "We have shown how quick we can move when we have a good idea."