So Where's the Beef? McDonald's Tests Fresh, Not Frozen, Patties

Editors' pick: Originally published Nov. 29.

American fast-food giant McDonald's (MCD)  has fired another shot in the great burger battle.

Facing increasing competition in the patty sphere, as well as attempting to combat the negative effects of a restaurant slowdown, the company has said that it is testing an innovation to its menu: fresh beef. Will this impress investors?

McDonald's has long depended on a network of suppliers that provides frozen beef burger patties to its restaurants. However, the chain is testing fresh, never-frozen patties in 75 Oklahoma locations, after recently conducting the tests in the Dallas-Fort Worth area, as well.

The restaurant chain, led by relatively new Chief Executive Steve Easterbrook has undertaken an initiative to revamp its image amid trouble in the overall restaurant sector.

Many analysts have said that the industry is on the cusp of or even in a "restaurant recession," fueled by a heady brew of election year malaise, fierce competition from new restaurant chains and low prices for groceries in supermarkets.

Since Easterbrook took the reins of the company in March 2015, he has initiated a series of changes to the restaurant chain and its menu in an effort to revitalize both the business and its stock.

On the operations side, this has involved phasing in table service, as well as rolling out mobile application ordering, something that Starbucks has mastered.

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But on the menu side, there have also been a number of changes including implementing all-day breakfast, as well as testing different size options for burgers. The company has been making these menu changes in an effort to capture millennials who tend to be more health-conscious when making food choices.

McDonald's also has to compete with the fast-casual restaurant sector, which offers fast-food counter convenience but with ingredients that are deemed fresher and healthier.

But the new fresh patties are a step beyond replacing high fructose corn syrup in select baked goods and trying out ingredients such as kale and quinoa.

In the test, these burgers are replacing the frozen burger meat in the company's signature Quarter Pounder line. And they are intended to draw an audience interested in quality, as well as competing with fast-casual burger chains such as Habit Burger, Shake Shack and even fast-food rival Wendy's, which has long prided itself on its fresh meat.

Granted, the introduction of fresh food could cause major disruptions to McDonald's supply chain. And the company will need to ramp up its food safety, because fresh, never-frozen meat poses a threat of food-borne illness, and the last thing McDonald's needs is a Chipotle Mexican Grill-style debacle.

However, the moves that the company is making toward retaining and even increasing its market share are positives. McDonald's remains a legacy stock to hold for the long term.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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