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Insights 3 Aug 2011

On Our Radar: Walmart and McDonald’s Take Aim at Obesity

By Mohammed Al-Shawaf

With the backing of First Lady Michelle Obama and her campaign to end childhood obesity, Walmart announced a plan to open up to 300 new stores over the next five years in U.S. “food deserts”, wisely aligning its company’s growth plans with the high-profile, publicly-backed initiative. The company, which has reported falling same store sales in each of the past eight quarters, sees urban markets as a critical growth opportunity, and its push into food deserts is an important arrow in its quiver against recalcitrant community members that see only negatives in Walmart’s entry.

Not to be outdone in the anti-obesity campaign, McDonald’s announced it would halve the amount of French fries and add fruit in its Happy Meals. While McDonald’s had already been offering parents the option of asking for fruit instead of fries, a Yale study showed that only 11 percent chose the healthier option. McDonald’s move, which is arguably more ambitious than Walmart’s as it will go beyond access to healthier food (which a recent Food Marketing Institute study (PDF) re-affirmed is “no guarantee” in changing people’s eating habits) into “editing” the choices available in Happy Meals, is counter intuitively being characterized as reactionary, with even the fast food chain making “it clear that it was changing the composition of Happy Meals in response to parental and consumer pressure.”

What lessons can we learn from the Walmart and McDonald’s case studies? Adapt (your business model) or die.

McDonald’s, despite the recent efforts to provide more “healthy” options is still overwhelmingly geared towards selling burgers and fries (see its divestments in “healthier” chains Chipotle and Pret a Manger), making it a less-than-enthusiastic anti-obesity partner. While it may have the appetite to halve Happy Meal fries, it cannot profitably go any further. 

Adaptation will be the lynchpin to Walmart’s success in urban areas too, since despite the national orientation of the anti-obesity campaign, this is a local issue with local implications. Will Walmart be able to win local champions to enter these markets and what concessions will it have to make in order to do so? Is it willing to employ “smaller format” versions of Walmart that can co-exist with local retailers? While open questions like these will remain, its recent moves are directionally correct and support why Walmart continues to show up in the top five of our Survey on Sustainability Leadership. McDonald’s may want to start taking notes.

With contributions from Heather Mak and Elvira Thissen.

For more on food and the need for transformation in the system, check out our recent report, Appetite for Change.


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