Patty Producer for McDonald’s Lays Off Workers
COHOES, N.Y. (AP) _ Layoffs at a company that supplies meat to McDonald’s Northeast restaurants is the latest indication that Americans are looking beyond the burger for fast-food fixes, analysts said on Monday.
The Equity Group, a processor of hamburger patties and steaks for McDonald’s, gave notice Friday to 54 of its 115 employees that they would be laid off Oct. 26.
The layoffs are to let the subsidiary of Philadelphia-based Keystone Foods ″reposition itself for the 1990s,″ said Andrew Kornick, vice president and general manager of the plant just north of Albany.
Kornick would not say Monday what precipitated the layoffs.
But he told the Albany Times-Union on Friday that the cuts at the plant, which produces exclusively for McDonald Corp., were ″due to a national decline in beef consumption.″
McDonald’s Northeast regional coordinator, Terri Capatosto, denied hamburger consumption has fallen. She said work at the upstate New York plant has been moved to plants in Pennsylvania and Ohio to be closer to beef suppliers in the Midwest and Southwest.
″We are in fact selling more hamburgers this year than last ... by several million pounds,″ she said.
Overall sales at McDonald’s have risen 8 percent in the first six months of 1990 compared with the first half of last year, Capatosto said. She could not say how much of the increase could be attributed to hamburger sales.
Hugh Zurkuhlen, an industry analyst with Salomon Bros. in New York, said the layoffs were the first of their kind he had heard about. He said they are probably due to the ″double hit″ of a weak economy and the national decline in beef consumption.
″There’s no question that beef consumption could have something to do with it,″ Zurkuhlen said.
″Restaurant sales in the industry are very, very soft, and any future growth in sales in McDonald’s is not likely to come from hamburgers. They account for less than 50 percent of sales.″
Kathy Duguid, regional marketing supervisor for McDonald’s in Albany, said she could not comment on Equity’s decision or reveal the company’s meat patty demand from Equity.
The burger, once the undisputed king of fast food, began facing challenges in the 1980s as health-conscious Americans switched from fat-heavy beef to lighter fare. Fast-food restaurants began offering more non-beef items.
McDonald’s introduced Chicken McNuggets in 1983, salads in 1987 and a chicken sandwich in 1989.
In May, Miami-based Burger King Corp., the nation’s No. 2 fast-food chain after McDonald’s, introduced the ″BK Broiler,″ a broiled chicken sandwich on an oat bran bun.
Cori Zywotow, director of media relations for the chain, said the new sandwich has been a ″tremendous success.″ She said the company is selling 1 million BK Broilers a day, already half as much as Burger King’s flagship sandwich, ″The Whopper.″
Burger King, like other fast-food chains, does not release a breakdown of sales figures.
Hardee’s Food Systems Inc., which ranks right behind Burger King, has in the last 18 months introduced a non-fried chicken sandwich and ″The Lean 1,″ advertised as the quarter-pound hamburger with the least total fat - 18 grams - in the fast-food market.
″Look at the menus at any of the burger giants and it becomes clear that Americans are leaning to more low-fat, low cholesterol items,″ said Jerry Singer, director of public relations for the Rocky Mount, N.C.-based chain.
″Sales of red meat in the entire industry have been declining for the past five years,″ he said. ″White meat has been on the increase for the past five years.″
James Murren, an industry analyst with C.J. Lawrence, suggested that a decline in beef production probably wouldn’t be enough in itself to cause the layoffs. He said he thinks the plant likely closed because of reduced overall sales at McDonald’s.
″McDonald’s is declining most severely in the Northeast,″ he said.
Michael Mueller, an analyst with Montgomery Securities, said the layoffs also could reflect sales losses McDonald’s has incurred since 1988 due to lower-priced competition and delays in diversifying their menu.
″A lot of McDonald’s problems are self-inflicted,″ Mueller said.
Zurkuhlen said that although the hamburger will probably never regain the dominance it once had, it will remain a fast-food anchor for the foreseeable future.
″Hamburgers are always going to be part of McDonald’s as long as people are eating them,″ he said.