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Sylvain CharleboisIf you’re looking for a recent textbook case of responsive supply management engineering, look no further than McDonalds Canada.

Echoing its U.S. partners, the fast food giant committed to exclusively use cage-free eggs within the decade, already committing to the use of 5 percent free-range eggs by the end of this month.

McDonalds Canada purchases 120 million eggs a year, making it one of the largest buyers in the country. Over 3.2 million laying hens in Canada are required just to supply the restaurant chain.

Other corporations have already dedicated themselves to the same objective, but McDonalds Canada move is different. The impressive number of hens alone clearly signals how audacious its decision really is.

For years, animal welfare advocates have pressured food companies to buy eggs from producers who have completely eliminated battery cages; now, based on some very recent research, it seems that their audience is broadening. As a result, consumers are increasingly concerned over how farm animals are treated. Some international governments have already implemented bans on battery cages, including the European Commission with a policy that started in 2012. In the grand scheme of things, this move to free-range egg use reflects a leading company anticipating what’s coming down the pipe, policy-wise.

Some credit should also be given to Canada’s egg industry, which is often perceived as extremely restrictive. Overall, supply management has been somewhat of an obstacle for restaurant businesses looking to do more for their customers. McDonalds USA recently committed to buy antibiotic-free chicken, but McDonalds Canada could not move forward with the same goal, given our quota system and strict code of practice regime. The only message Canadians received in this case is that McDonalds Canada is pondering its options, which was disappointing for many.

But despite issues of supply management, McDonalds Canada’s egg timing was right for all involved. The Canadian egg industry, for example, is currently reviewing its code of practice, and McDonalds Canada’s decision will obviously require massive investments in primary production, and may trigger additional distribution costs.

Cage-free birds are more labour intensive and require more management time than cage-housed birds, and the capital cost per hen for cage-free housing is much higher. The timeframe of 10 years will allow McDonalds Canada and partnering egg producers to amortize some of the upstart costs.

The incremental approach seems to be the best choice for such an undertaking. It is also plenty of time for the system to adjust its code of practices. However, over the long term, the sheer size of the market McDonalds Canada represents may actually generate economies of scale, which could allow the chain to maintain decent menu prices for its customers, but only for a little while. There is little doubt that its move will lead to higher costs, and consequently, more expensive menu items.

The restaurant chain’s decision to go cage-free clearly underscores the fact that the food service industry is recognizing consumers’ willingness to pay more for their food if farming practices reflect their values and beliefs. All of this is powered by social media, culinary gurus and food shows that consumers view loyally.

However sound McDonalds Canada’s decision to eliminate battery cages from its supply chain strategy may be, it still needs to be supported by good evidence in order to enhance its reputation when it comes to animal welfare. Short-circuit cameras and testimonies from farmers, for example, can enhance the credibility of McDonalds’ Canada new found partnerships. A commitment to transparency goes a long way in the age of instant, real-time information, especially when the intent is to reduce concerns about the practices of an industry that is remotely located from 98 percent of the population. McDonalds Canada can act as an effective agricultural goodwill portal to society. As for McDonalds as a whole, this decision only makes good business sense.

Unlike the U.S., McDonalds’ Canada has yet to decide if it will move forward with “all-day breakfast”, which would likely increase its demand for eggs. Given that the Egg McMuffin is one of McDonalds’ most popular menu items, it may not be such a wise move just yet. In the meantime, despite some questionable decisions made in recent years, McDonalds’ Canada got it right this time around.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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