With beef purchases in Australia and NZ last year topping 110,000 tonnes, MAC Asia Pacific is arguably the region’s single biggest beef customer, with the possible exception of the two major domestic supermarkets.

And as a dedicated supply partner to one of the world’s best known retail brands, the company has a monumental challenge in sourcing and supplying raw material that carries the requisite safety and assurance tags that will not jeopardise the McDonald’s global brand.  

Frank Carbone, managing director of MAC Asia Pacific, spoke at this month’s Australian Meat Industry Council business forum in Adelaide, where he discussed where the business is heading, and its desire to establish closer, more transparent and more predictable alliances with its supply partners.  

As discussed when Beef Central introduced the MAC Asia Pacific operations to readers in this earlier profile, the business functions with the single purpose of supplying McDonald’s burger patty requirements. It is regarded as a unique model within the McDonald’s ingredients supply chain system.

The business is owned under a consortium structure by McDonald’s five global burger pattie manufacturers – Keystone Foods and OSI (both of which operate pattie plants in Australia), Cargill, Lopez Foods and Golden State Foods.

MAC Asia Pacific today services all of McDonald’s Australian and NZ with manufacturing beef sourced out of both countries, in addition to supplying about 15pc of overall requirements into the McDonald’s US business. Increasingly, the Asia-Pacific and Middle East regions are also becoming significant areas of supply growth.

In order to fill that demand, MAC last year purchased about 110,000 tonnes of beef trimmings and manufacturing beef out of Australia and NZ, out of a global McDonald’s beef requirement of close to 900,000 tonnes. That means MAC currently accounts for more than 12 percent of McDonald’s total global beef needs, and the figure continues to grow.

“That growth is partly a tribute to the quality and security that a beef-producing market like Australia offers the rest of the world,” Mr Carbone told the forum.

Currently there are 40 processing facilities across the region approved for McDonald’s supply, including 22 in Australia, and 18 in NZ. In addition, there are now close to 20 lamb plants approved for supply, following the recent launch of the Lamburger (see Beef Central’s earlier report).    

Mr Carbone explained that the MAC business was not a profit-driven business model, but operated under a ‘pass-through’ model, buying beef and transacting that material at cost with its customers – its five shareholders, the global grinders servicing McDonald’s burger pattie requirements. MAC’s costs are recovered using a fee structure that applies on top of those trades.

“It’s a very transparent business, across the system, and it’s a model that drives the outcome at the right end of the chain for McDonald’s,” Mr Carbone said.

At the time of its establishment seven years ago, the MAC business was also looking to take advantage of what was then a very competitive price point for imported beef into the US. Prior to that, McDonald’s US maintained a ‘domestic beef only’ policy.

Since MAC’s foundation, the McDonald’s footprint has evolved substantially, with major growth occurring in Asia and elsewhere. MAC’s operations had continued to grow in parallel, with other functions and capabilities that were not part of the original model being added along the way. These included trade financing, work in the logistics area, and employing a full-time quality manager, Mr Carbone said.

“The MAC business is really the link between the McDonald’s company and the beef processor community, in executing the aim of delivering the high standard for assured, safe beef that McDonald’s seeks globally,” he said.

“That focus will remain for us as we look to the future, driving stronger alignments between us and our supply chain partners so we can build a more sustainable business relationship.”  

Australia and NZ very much represented a key strategic source of beef for McDonald’s in the Pacific, and that would only continue to grow in relevance as Asian and other markets continued to grow.

“Other beef supply countries are having their issues at the moment, and we see that demand pressure coming through the McDonald’s system as well. Even before McDonald’s ramps up its next schedule of expansion, there is currently a new McDonald’s outlet opening in China every 36 hours.”

While beef currently did not represent as large a base in those Chinese restaurants as it was in outlets in western countries, it continued to grow.

To meet some of these challenges, MAC’s focus was shifting to working even more closely and strategically with its suppliers, to see how more shared value could be driven through the supply chain, Mr Carbone said.

McDonald’s emphasis on safe, assured supply of beef to its system partners around the world would only continue to grow in importance as new standards and requirements continued to come into play around the world, he said.

The same applied to MAC’s ability to give McDonald’s a competitive advantage in long-term, predictable, competitive pricing.

“The more stability we can provide in terms of an outlook on both price and volume, and security of supply, the better McDonald’s will be able to manage its business at the restaurant end,” he said.

In this area, MAC was looking at developing more risk-management strategies, enabling it to take forward positions. But that would not happen at the cost of creating ‘winners and losers,’ Mr Carbone said.

“We’re very much focussing on ways we can come together with processors to develop mechanisms that ensure that nobody loses in the process,” he said.

“At the same time, as well as achieving greater assurance in supply, we’d hope that process can drive some efficiency and certainty through each processor’s supply chain, right back to the cattle property.”

“The spin-off from that also, is that if MAC and its processor suppliers get a better understanding of each other’s businesses, it provides scope to look for opportunities that make sense for both parties.”

One aspect MAC is actively promoting currently is an increased level of engagement between.

“Knowledge is power, and if we can share a little more among each of the stakeholders – ourselves, McDonald’s, approved processors and the grinding community – to get a better understanding of what different aspects of the supply chain are looking for – we think it can drive some better outcomes,” Mr Carbone said.

“We’re really looking for value-based change, for all parties. If McDonald’s partners are not financially successful, ultimately its own financial success will suffer, also.”

As part of that process, MAC has incentivised its supply process.  Since its establishment in 2005, MAC has paid out more than $7 million to suppliers under its MAC Rewards program, against a specific set of performance criteria. That process has resulted in a number of sustainable improvements in performance over the past seven years, and may shift to a ‘processor specific’ rewards model some time soon.

MAC also sees value in developing approaches that integrate information better through its supply chain. “Through a web presence, we already capture a lot of data from both our raw material suppliers and our grinders, which provides quick feedback on what’s happening, performance-wise,” Mr Carbone said.

“But we need to start to expand that into some of the supply and demand scenarios, to give us a better view of where we stand, so we can pair-off our respective needs, and potentially make better decisions. We’ll never predict 100 percent of what’s going to happen supply-wise, because there’s always a substantial spot element to what we do, but in real terms, the more of that we can position up-front makes a lot of sense for all parties.”

 

Sustainability focus

As part of its relationship with McDonald’s, MAC Asia Pacific is looking at developing its own sustainability strategy, in concert with McDonald’s Global Sustainability Framework.

“This is in some ways new territory for us, but we’re conscious of the need for it to be both practical and achievable, from a processor/buyer perspective,” Mr Carbone said.    

“Sustainability for us covers a lot of territory: it’s not just about the pure environmental issues, but also embraces the economic side, how the supply chain can be sustained over time, and how communities are affected.”

“It’s really about opportunities that represent good commercial sense. Really, the story behind the beef pattie sitting on the plate is often a great sustainability story already. There’s a lot of good news stories there, inherent in the production of that pattie, that we need to tell.”