Hewson wants fast profit with healthy food

Marcus Hewson may not be impressed with the dismal claim that the McDonald's empire is a greedy monster responsible for the bloating of a generation. Yet he is not angry either. A fast food man for 30 years, he is accustomed to attacks on the brand of the omnipresent golden arches. He still says that burgers are good for you, but only in moderation.

Hewson has been boss of McDonald's Irish unit for four years, a period in which the multinational has been subjected to barrage of attacks over the role of fatty food in fuelling rampant obesity in the US and elsewhere.

The company's latest effort to defy the negative publicity came this week, when it pledged to put "easy-to-understand" nutrition labels on its food from next year.

"We've been trying to educate and we're going to make a bigger effort in the future so that people can understand that," he says.

McDonald's is obviously keen to counter the image of popular films such as Supersize Me, which suggested that Ronald McDonald is more a sinister figure than a kindly clown. Still, Ireland has traditionally been one of McDonald's brightest outposts.

A testing ground in Europe for new concepts such as the McCafé and, in its day, the drive-through restaurant, the chain has rapidly extended its reach. It will have 75 outlets here by the end of this year, 50 of them run by franchisees, with the remainder company-owned.

While McDonald's was recently granted planning permission for a restaurant in Ennis, Co Clare, Hewson says that the company can sustain up to five openings per year into the future.

So how many McDonald's can Ireland sustain?

"In the Australian model, we could be building one restaurant for every 16,000-20,000 people. We have one for about every 60,000 here. So when you say how many can you open, can we get one for every 20,000? I don't know whether we want to get to that... The growth rate for us is three to five restaurants a year. That's what we're looking for."

Indeed, the addition of five outlets this year might imply that the chain is in full-steam-ahead mode, in spite of the international onslaught against fast food.

However, the McDonald's Restaurants of Ireland company today reports falling sales, diminished profits and an impairment charge of some €1.8 million to cover the closure and relocation of two or three outlets that are not at working for the company.

Hewson, who does not reveal the location of these restaurants, describes the impairment charge as a "slight hiccup" after a long period of growth.

McDonald's Restaurants of Ireland Ltd reports a turnover in 2004 of €70.62 million, down from €71.33 million, reflecting franchise fees and revenue from the company sites.

It attributes the actual decline to a dip in new franchise business, or "conversions", but says that overall restaurant sales were up.

Other figures are relevant here. McDonald's says it had overall food sales of €155-€156 million in the 70 restaurants that were open last year. This figure, which includes franchise sales, is not filed with official records.

However, the company says the 2004 sales were some 2 per cent stronger than in 2003 and adds that the profit margin was in the 3-5 per cent range. That implies a very rough profit range of €4.65-€7.8 million, distributed between the company and its franchisees.

While Hewson says "old sleepy high streets are just not viable any more", he insists the business is in a fundamentally strong position and poised for growth. Crucial will be the development of the breakfast business, new "healthy options", the drive through and the McCafé business. "We're getting our existing restaurants to grow rather than build a lot of new ones, that's what's really changed," he says.

"Of course, we get a lot of competition. We see a lot of competition coming from places like garages, convenience stores, convenience food emerging in small outlets all over the place."

The response from McDonald's is to extend its reach while positioning itself among the purveyors of healthy foods. Not for nothing are salads available now, among the fries, nuggets, soft drinks and shakes.

"We hope to get more women back into our restaurants. We've seen a drop in the number of women coming to eat with us," says Hewson.

But if the availability of salads provides "permission" for the health-conscious to cross the threshold, he acknowledges the difficulty in appealing to children with such fare. "Kids are our prime customer group and always will be," he says. If children are expecting a treat, a salad and water is unlikely to do the job.

Neither does Hewson downplay the extent to which the company, with 40 million daily customers worldwide, find itself running into trouble over the obesity epidemic. "We're obviously in the forefront of that and that's why we want to be part of the solution to it. That's why salads were introduced and healthy active lifestyles.

"We're a big brand. We're right at the forefront, whether it's obesity or something else. We've always been in the top three brands in the world. We're always at the forefront of any issue like that. Therefore, we want to be part of the solution."

While McDonald's onward march sometimes seems unstoppable, Hewson says the difficulties are not unexpected, and he is not one for anger or distress.

"I personally don't get angry because I've been around so long and seen so many attacks. Over the 30 years that I've been with the company I think I've seen almost everything. Someone new in the company said some of this is unfair, we've got to retaliate and this sort of stuff."

For Hewson, it's not personal. "There is always an issue, whether it's obesity, which it is at the moment, or whether it is mad cow disease or something like that years back."

Speedy food is no threat to those with a balance in their life, he says. "There's actually nothing wrong with a hamburger. If you eat 25 a day or if you eat French fries every day, surely you're going to have a problem... Make sure you're not eating one every day of your life, we try and promote that with everybody. It's part of a balanced lifestyle."

This comes from a man with a satsuma perched on his desk. On message.