MacProduce
The McDonald's restaurant chain has a major impact on the US beef-raising and the potato-growing industry, an impact was has helped to thoroughly change the way in which both of those market segment operate.
It's not that McDonald's has oligopoly power - it consumes just 4.1% of the beef and 2.2% of the potatoes raised. But its standards for what it will buy have been imitated by its competitors and have radically changed what were once diverse markets. This is scene especially in the potato industry, where a certain standardized variety of Russet Burbank potatoes is displacing many other stocks. Biologists fear that such a monoculture will be highly vulnerable to disease.
Now McDonald's is moving big into fresh produce, according to a New York Times article ("You Want Nay Fruit With That Big Mac?", 2/20/2005). Spurred on by the "health kick" and the bad PR of selling fat-, salt-, and carb-laden megameals, MacDonald's has started offering "healthy" alternatives in a big way. One new product is fresh apple slices, served with a dipping sauce. (The apples are surely healthier than fries, but the dipping sauce is full of sugar.) They have also started offering a wider variety of salads, including some using perishable spring mix instead of the usual iceberg and romaine standards.
But when McDonald's starts selling a new product in its 13,700 restaurants, that product gets instantly transformed, industrialized. McDonald's is planning to buy 135 million apples this year alone, making it by far the #1 apple buyer in the world. The company plans to buy 116 million pounds of lettuce and 50 million pounds of grape tomatoes.
In the apple world, McDonald's is "suggesting" to growers that they grow the Cameo and Pink Lady varieties, apple types that are currently not very common. The company also has large carrot, orange, and grape producers hungering for a piece of the action.
Since only the big can serve the big, McDonald's is likely to reduce the suppliers to a handful, increasing the consolidation pressures that already exist in the industry. It will certainly demand ever more standardization, a requirement that small farmers won't be able to keep up with. And once McDonald's takes the lead, the pressure for the rest of the fast-food industry to fall in line will be irresistible.
