McDonald's Invited 300 People to a Healthy Meal in Guangzhou. What Was It Trying to Prove?

McDonald's is stuck with an aging customer base and a menu that has stopped surprising anyone, and it calls its new healthy lineup the core of its response for 2016. Out of that came a PR show built around raw vegetables.

Around 11:30 a.m. on July 14, a long check-in line formed outside the third-floor ballroom of the Grand Hyatt Guangzhou. A McDonald's staffer stuck stickers printed with cows, tomatoes and chickens onto guests' arms at random. Three more stacks of the same stickers sat on the check-in table in front of her.

Walk into the ballroom and you might think you had wandered into a vegetable market. Five tables, each more than 10 meters long, were covered with flowers, apples, carrots, corn, potatoes, onions, peppers and cabbage. As each guest sat down, a waiter in a white shirt stepped up, took the white napkin off the table, folded it into a triangle and laid it flat across the guest's lap. In front of every seat was a full French place setting: two porcelain plates, four forks, three knives and two spoons.

There were also three temporary photo booths. A cardboard cow carried the slogan "100% Real Ingredients, 100% Beef," and the wooden frame beside it held more cabbage, tomatoes, corn and carrots. McDonald's staff ran around with DSLR cameras, and a loudspeaker kept urging everyone to go get their picture taken. A few people did pose with the cardboard cow, then ran the shots through an instant photo printer.

McDonald's may have spent as long as six months preparing this event, and sent the invitations out two weeks ahead. It was called the "McDonald's Feast," an idea the company's PR department had proposed a year earlier. The lunch guests were 150 members of the media; the dinner guests were 150 consumer representatives and lifestyle key opinion leaders (KOLs). Both meals had the same menu: six French-fusion dishes and three drinks designed by the internet-famous chef "Xiaobaojun." The point, McDonald's stressed, was not that these dishes would one day be served at McDonald's restaurants across China, but that "every ingredient comes from a McDonald's supplier, no different from what is used in McDonald's kitchens every day."

Feeding 150 reporters was not a great bargain, because while McDonald's was praising carrots and tomatoes, the reporters cared about something else: the news, three months earlier, that the company was selling the franchise rights to its China business. The latest development, reported in July, was that five sellers — China Cinda, Beijing Sanyuan, Sanpower Group, GreenTree Inns and Huabin Group — had been confirmed for the second round of bidding in September. To the media, who ends up running McDonald's in China obviously matters more than carrots.

Zhang Jiayin, CEO of McDonald's China, did not want to linger on that question. She steered the conversation to McDonald's culture and brand. "We don't want a franchisee to come in and say, I'm going to sell noodles, or some product with no direct relationship to McDonald's," Zhang said. Then she added, "I'm only giving an example."

In a 15-minute speech, Zhang first talked about McDonald's supply-chain management and food safety, then gave most of her time to "menu reform" — a major strategy for McDonald's China in 2016. "Less salt, better oil, more fruit, vegetables and grains." That is also why ingredients were the stars of the McDonald's Feast.

The products that do have a "direct relationship" with McDonald's are now under scrutiny. Unlike the Husi Food scandal that broke in 2014, what McDonald's has to deal with today is not only food safety, but fierce competition in the fast-food market and consumers who are growing fussier about how they live.

The food-ordering apps most consumers already use keep adding more places to eat, and they are drawing McDonald's customers away at every hour. At the same time, consumers under the pressure of daily life "want to treat themselves a little better," which means that within a limited budget they are looking for food that is better for them. In cities like Beijing, Shanghai and Guangzhou, healthy meals, mixed fruit-and-vegetable juices and light salads have become a trend, and every information channel, WeChat official accounts included, is preaching the low-calorie life.

"We've counted: 60% of [McDonald's] customers are regulars. Some customers really have drifted away — they haven't come to McDonald's for two or three months. How do we invite them back? There are two basic strategies. One is to launch projects that give consumers a jolt — Create Your Taste burgers, the Minions, World of Warcraft, Heroes of the Storm," Zhang said in an earlier interview with the media. "The second strategy is value. The idea that around 15 yuan buys you a good meal is what brings customers to McDonald's every day."

Zhang has been CEO of McDonald's China since April 2015. Before that she spent 15 years at the company, serving as China CMO and as vice president of McDonald's China and general manager for the southern region. She said nothing about whether the lost customers had anything to do with health.

That may well be the case. Set aside the natural pull that fried, fatty food has on human beings, and the people who eat at McDonald's often are probably not the ones most sensitive to calories. Eating at McDonald's was once considered fashionable. People held birthday parties there, went on dates, sat around talking — until it became the place where schoolchildren do their homework and some homeless people come in to cool off or keep warm. (China is a big and complicated market, of course, and McDonald's is at different stages in different regions.)

It is worth noting that in the processed-food industry, consumers who buy the same brand again and again — whether in supermarket packages or at a restaurant table — are called "heavy users." At Coca-Cola, Kraft, General Mills and many other companies, marketing tends to concentrate on getting these heavy users to buy more, a strategy that saves more time than hunting for entirely new customers. It also happens to bear out the famous 20/80 rule, that 20% of consumers drive 80% of consumption — though the figures always wobble a little.

In an earlier interview with QDaily, McDonald's said it believes young people in China love the brand. That is somewhat different from the company's position in the United States, where McDonald's faces unusually fierce competition from its peers and serves a broader range of customers. In China its only direct competitor for years has been KFC, owned by Yum! Brands. Both are fast-food brands that grew up with the generations born in the 1980s and 1990s. Today the two are in much the same spot: menus short on innovation, customers growing older, and the wave of healthy eating breaking over them.

On that last point, Americans are more anxious than the Chinese. Government agencies including the FDA began warning consumers 20 years ago to watch the salt, sugar and fat in their daily diets. Study after study has also exposed the food industry's clever tricks — carefully calculating the mix of ingredients consumers cannot resist, so that they buy more and eat more.

The result was the loud anti-sugar, anti-fat, anti-calorie movement across Europe and the United States. In 2013, McDonald's introduced a healthy menu in the U.S., adding side salads, fruit, vegetables and potatoes, with plans to extend it to more markets by 2017. That same year, McDonald's USA launched a premium chicken wrap called the McWrap: smaller than an ordinary chicken wrap, with more vegetables, and advertised as using "fresh chicken from the farm."

In 2015, McDonald's UK tested its Signature Collection burgers, billed as "100% pure beef," at 28 restaurants; one selling point was better ingredients and recipes developed with Michelin chefs. In Australia, McDonald's tried a premium breakfast, adding sides that felt less like fast food — spinach-stem salad, scrambled eggs, and avocado with feta cheese.

The McWrap, though, was formally taken off the menu this year; it held little appeal for young people. McDonald's moved too slowly on health in the U.S., and with low worker pay and dated dining rooms, playing the health card alone achieved almost nothing. American disappointment with McDonald's has been across the board. The one hopeful response came when the company began serving breakfast all day — and McDonald's does not know exactly why that worked.

McDonald's does not have a tradition of reporting its China results separately. In its fourth-quarter 2015 and first-quarter 2016 reports, it disclosed results only for the high-growth markets segment that contains China, Russia and Italy, saying recent sales had improved. The one thing outsiders can confirm about China is that of its 2,200 restaurants, 90 closed last year. Given that the company is opening 250 restaurants in China this year, that pace of closures makes the market look less than smooth.

Perhaps because conditions differ from region to region, McDonald's China, in carrying out headquarters' strategy, seems to put more weight on product innovation than on healthy eating alone.

"We wanted to take our own raw ingredients and, through very creative cooking, give everyone a completely new way of seeing them, a new understanding of our ingredients. That is the main reason we are here today," Zhang said.

McDonald's is launching new products in China faster. In the first half of this year it rolled out a multigrain congee, a whole-grain McMuffin, a fresh vegetable cup and apple slices, one after another. It also plans to upgrade its restaurants' cooking-oil formula starting in 2017. Last year it brought CYT (Create Your Taste), the Subway-style build-your-own-burger format it had launched in Australia a few years earlier, to China.

Smart restaurants are on the list of ways to attract young consumers too: investing in digital ordering hardware, opening experience stores, renovating restaurants, doing more on WeChat, Weibo and other digital media. The shift dates to 2013, when McDonald's headquarters hired a chief digital officer named Atif Rafiq. Rafiq had worked at Amazon and Yahoo, and his first priority after joining McDonald's was building the company smart restaurants.

Restaurants called "Future Smart Concept Restaurants" opened in Beijing and Shenzhen early this year. In Zhang's account, these are "data-driven" spaces where you "don't need to queue and don't need to bring a wallet" — you order on your phone and the food is brought to your table. McDonald's China also said it plans to launch an app next year, though it would not share more details yet.

But the menu outranks everything. If McDonald's were not so keen to emphasize taste, it would not have needed to invent a "McDonald's Feast." It even hired two local Guangzhou rappers to perform a song about McDonald's ingredients.

At the McDonald's Feast, the chef known as "Xiaobaojun" stood on stage working hard to explain where each dish came from and what inspired it. The names had clearly taken some thought. A drink mixing avocado and soy milk was called "Cardamom Green Juice"; the fry-shaped rice cake was "Rice Fries"; and a thick tomato soup called "One Tomato Soup" turned out, once you cut into it, to have diced beef buried at the bottom.

About 300 meters from the hotel, inside Zhidi Plaza, there is a McDonald's. A Hello Kitty toy by the door made a few people stop. The open-fronted restaurant was full of shoppers, and more than a dozen customers stood packed in front of the registers. They had no idea what was happening a few hundred meters away in the luxury hotel. They did not need to know, either, because none of these so-called creative dishes will ever reach McDonald's everyday menu.

"The point today isn't that I get to eat this here and won't be able to get it at McDonald's later. It's to tell everyone that McDonald's ingredients really are fresh and good quality, exactly the same as the ones you use at home," said Xu Yingting, vice president of public relations at McDonald's China.

An event on this scale, of course, needs an expert on stage. Cai Meiqin, a professor in the nutrition department at Shanghai Jiao Tong University School of Medicine, told the guests: "From the standpoint of nutrition science, there is no such thing as junk food or healthy food. What exists is bad combinations, or an unreasonable way of living."

This may be a deliberately vague statement. If Professor Cai was not talking about natural foods, it could almost be called irresponsible. The raw materials of the food-processing industry have changed beyond recognition over the years, with chemicals added in quantity to speed up industrial production and widen the sales map of a global supply chain. Without these "brilliant techniques," food could not keep this long, be made this fast, or be sold to this many people. In a chain of industrial cooperation this long, quality failures cannot be avoided. The Husi Food scandal, now rarely mentioned, is the best illustration of "turning food into garbage."

Then again, Professor Cai may only have meant the carrots and tomatoes McDonald's had laid out on the tables — ingredients that carry no symbolic meaning at all (and are outrageously healthy), until they become part of a McDonald's recipe. McDonald's believes they stand for healthy living and for the company's future. What do you think?