Fortune got the inside scoop on McDonald’s (MCD) transition to serving 100% cage-free eggs within the next decade for its September cover story. The tale of what it will take, and how it could change the broader food system, landed the company on our Change the World list. As part of story we sat down with McDonald’s CEO Steve Easterbrook in Chicago for a video interview.
The following is the full transcript.
McDonald’s is on Fortune’s Change the World List because of the big changes you’re making to your massive supply chain. Give us the highlights.
As you say, our footprint is significant around the world, and we always try to source our supply as close to the markets in which we do business. We also know that our sheer purchasing power really does have an influence. What we’re really trying to do is demonstrate that we want to use our size and scale for good, in helping egg farmers, in helping our agriculture practices, and clearly working on the agenda that our customers really care about.
What does it take to implement something like this—cage-free eggs for example?
It takes a committed supplier base because you’re asking a lot of your suppliers, and you’re asking them to join you on a long-term journey so it’s a real commitment from their side. And a commitment from us to be a reliable customer for them, and then we just build to a plan. We stay committed, we stay focused on it. And, as we make a move, often many others make moves alongside us, and we can begin to change some agricultural practices along the way.
So we’ve got cage-free eggs, antibiotics. What are some of the other things you’ve done?
The moves we want to make are right through the core of our menu—the ones that the majority of our customers can benefit from—whether it’s moving to real butter on our English muffins, real buttermilk on our buttermilk chicken. We continue to want to make investments in either the recipes, on the sourcing, on all the things that customers really tend to care about.
The company is in turnaround mode right now. How important are these changes to the plan and strategy?
All the actions we take as a business represent the brand and the direction we’re on. So whether it’s promotional activity, whether it’s the service standards in the restaurant, cleanliness standards, all the way through to demonstrating we care about the same things customers care about, they all join up. The customers join all those dots together. The sourcing moves we make to show that we want to be seen as a leadership business, a responsible business, an admired business, they work hand in hand with us running better restaurants day in and day out. Really all of these things communicate and represent what the brand stands for—our credibility, our commitment, and the brand journey that we’re on.
The cage-free announcement coincided with fan favorite All Day Breakfast. Tell us a little bit about that strategy and that planning. Why those two things together? All Day Breakfast is something customers have been asking for for a long time. Why now?
We’ve been challenging ourselves to shake off some of the legacy thinking that’s held us back. And customers,as you say, have been crying out for some of our breakfast items, or many of our breakfast items, to be served all day. We knew that was something we could operationally challenge ourselves to, but how else could we also further use our size and scale for good. So we look through the products and ingredients we serve and what can we do to demonstrate not only is this fun and relevant and engaging to customers, but we allow them then to almost see some of the aspirational standards we can bring from something like a cage-free egg, which is normally sold at a premium price. At McDonald’s it’s served at the price of McDonald’s with an aspirational quality and provenance to it.
Do you think you’ll be able to bring in new customers with this? Do customers care about something like cage-free? Does this have broad interest for people?
Well, different people care about different things in life, but there are certainly a hard core of people who are increasingly interested in what they eat, where does it come from, what’s in it, and how is it prepared. So we will have existing customers who respond by greater frequency come and join us more often, but also we may attract new customers who come in and see that there’s a McDonald’s that’s on the move, that’s really finding its mojo, and is truly demonstrating that it cares about the same things society cares about.
It was a tough quarter for the restaurant industry. What in your view is going on? What happened?
I think there’s a lot at play at the moment. First of all just the industry anyway is very competitive. There’s a lot of businesses that are working hard, who are at the top of their games. Therefore it’s always going to be a market share fight. But then you’ve got to think about the consumer. The consumer is going through a period around the world of uncertainty—whether geopolitical uncertainty, economic uncertainty—and that makes them a little nervous as well. And then there’s a number of dynamics at play, but ultimately at the end of the day if we can deliver a better experience day in and day out in our restaurants, we’re confident we can win that market share fight.
What is the key part of the strategy in your view? What are some of the main elements that you need to do to keep share and gain share?
Ultimately the bread and butter of McDonald’s is delivering great service, great quality food, at affordable prices day in and day out. That consistency is really, really important to our customers. Fundamentally we’ve got to keep working to make that everyday experience more consistent, more enjoyable, more fun. But then as we layer other meaningful moves on top—whether it’s fun and engaging promotional activity, or investments such as we’re making around the provenance of our food—we know all of those communicate the brand direction we’re heading in. And customers do respond and visit more often, and we do attract new customers at the same time.
Have you seen that? are you attracting new customers?
We are attracting new customers, and our existing customers are giving us credit by returning more often as well. That gives us the positive reinforcement to continue on this journey. So if we act on the customers agenda and customers respond to that, we believe that’s a strong equation for our business.
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You took on the CEO job last year. How have you tweaked or changed your turnaround plan since you implemented it last year?
You always make minor adjustments along the way, but largely what we set out to achieve—this was the second quarter of 2015—we have stuck to. It was a fairly straightforward turnaround structure that we devised. The first pivotal piece was to get the business back to operating growth. We have now delivered four quarters of growth across all four operating segments around the world.
And before that…
We’d had a period of decline. So the business was in a gentle decline but that’s unsatisfactory to us, our owner-operators, and clearly doesn’t work for our suppliers either. We knew we had to demonstrate that we could grow our organic business. Alongside that we want to create brand excitement and also take certain initiatives to unlock financial value. And we’ve really maintained a laser-like focus on those three pillars of the turnaround plan while at the same time we’ve been developing a longer-term growth strategy as well.
Where would you say you are in the turnaround?
I would describe it as three phases. The initial phase is a revitalization. Get the business into growth. The second phase is strengthen. Then ultimately you want to get back to being seen as a leadership business. I think we’re on that delicate stage where we’re transitioning from revitalization phase into strengthen. We want to end 2016 in a strong position and drive the business growth on the customers’ agenda through 2017 and beyond.
What is the most visible change you’ve made since becoming CEO?
I think the ongoing reinvestment in our restaurants around the world is significant. So we’re introducing technology to help smooth the customer experience with things such as self-order kiosks. We’re unlocking the opportunity technology offers us to smooth the experience customers have, whether it’s the drive-thru or in the restaurants. Those are the most visible changes to customers. But also the less visible ones still mean a lot, such as when you show you’re investing in the quality of the ingredients, and the recipes of your food, customers respond. That may not be visible but the signal it sends of the journey you’re on are very, very powerful.
We’re here in downtown Chicago, not far from where the company is going to be moving in the next couple of years. Why are you doing that? Why are you making that change?
We’ve had a wonderful time out in Oak Brook, which has been our home for about 37 years as the company has moved from a U.S. business into being an international business. However, ultimately I believe being on the edge of one of the most vibrant cities in the world doesn’t make sense for a brand like McDonald’s. Chicago is a wonderful, vibrant city with wonderful food cultures to it, wonderful talent downtown. So I think we’re going to be better set for the long term if we locate our headquarters really where the action is, where the vibrancy is, where there’s innovation, where we can retain the best talent and attract new talent. That will set us in good stead going forward.