Market Overview

McDonald's Scores Magnificent Win in Happy Meal Debacle

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By Justin Rohrlich Dec 01, 2011 3:25 pm

"This is a perfect example of how hard it is to create a regulation that achieves the intended effect," says health care economist Adam C. Powell, Ph.D.

Beginning today, all McDonald's (MCD) restaurants in the City of San Francisco are forbidden by law to give away toys with Happy Meals.

McDonald's response?

Eat it, California.

Since Policy Number 471.1 through 471.9 -- otherwise known as the "Healthy Meal Incentives Ordinance” -- now makes it illegal to include free toys with food that fails to meet certain nutritional standards, they will now cost customers an extra dime. So, McDonald's will, according to SF Weekly's Joe Eskenazi, “require Happy Meal purchasers to make a 10-cent charitable donation to Ronald McDonald House in order to receive their coveted trinket.” And, with that, the world's largest fast-food chain has pulled off a decisive, magnificent win.

"This law is not what my customers wanted or asked for, but the law's the law," local McDonald's franchisee Scott Rodrick told a reporter.

From the San Francisco Chronicle:

Instead of reducing fat, salt and sugar in children's meals and offering more fruits and vegetables, Rodrick's stores will adhere to the law Thursday by making customers pay an extra 10 cents for a Happy Meal toy. Customers who buy Happy Meals outside San Francisco, including just across the border in Daly City, will continue to get the toy gratis.

"It complies with the letter of the law," Rodrick said. The three other McDonald's franchise owners in the city have agreed to follow the same tack.

Proceeds from the toy sales will be used to help build a new Ronald McDonald House to temporarily house families with sick children at the new UCSF Hospital under construction at the Mission Bay campus.

“This is a perfect example of how hard it is to create a regulation that achieves the intended effect,” independent health care economist Adam C. Powell, Ph.D., tells me.

Powell says people “may feel even better about buying Happy Meals now that there's a built-in charity component involved. They were never bundled with altruism until now.”

Dr. Patricia Anderson, Professor of Economics at Dartmouth College and an expert on the economics of childhood obesity [PDF], cautions against putting too much emphasis on “smoking guns” like San Francisco has done.

“In my research, I've found that lots of small things add up and lead to childhood obesity,” she tells me. “I don't think a crappy plastic toy makes much of a difference.”

Time-pressed parents “are not going to bake their child an organic chicken every day,” says Anderson, who maintains that, “from a pure calorie standpoint, a small hamburger once in a while is actually not the worst thing in the world.”

In short, Anderson says, “You can't say that not having toys in Happy Meals would solve the country's health problems, nor can you say not having Happy Meals period would solve them.”

Monet Parham, the 42-year-old Sacramento mother of two whose complaints led to a lawsuit by the Center for Science in the Public Interest that ultimately resulted in the Happy Meal toy ban, believes otherwise.

"Happy meals are among those things frequently requested, and the first thing they ask me to do is open the toy," Parham said at a press conference last year. "I'm really concerned about the health of my children, and I don't think it's OK to entice children to get Happy Meals with a toy.”

Anderson finds herself unswayed by Parham's logic.

“If Monet Parham's child pestered her for a pony, would horses have been outlawed?” she asks.

A 2002 article by Rogan Kersh and James Morone in Health Affairs, the “leading journal of health policy thought and research,” explored the politicization of obesity in America.

“Obesity has been the subject of powerful public disapproval for more than a century,” they wrote. “The criticism developed, quite suddenly, at the end of the nineteenth century. What had long been a mark of prosperity became, as one popular magazine put it in 1914, 'an indiscretion, and almost a crime

Kersh and Morone looked at “the historical experience in four other private realms (alcohol, illegal drugs, tobacco, and sexuality)” and identified seven “'triggers' that prompt government to intervene in citizens' private habits” and found that “[t]he first trigger for political regulation of private behavior--social disapproval--has long been tripped in the case of obesity.”

Here's how it works:

With this trigger in cultural play, obesity begins to shift from being a private health matter to being a political issue. Scientific findings never carry the same political weight as does a villain threatening American youth. If critics successfully cast portions of the industry in this way, far-reaching political interventions are possible, even likely. When an industry becomes demonized, plausible counterarguments (privacy, civil liberties, property rights, and the observation that "everyone does it") begin to totter.

Perhaps San Francisco's city elders should have looked to New York City's experience posting calorie counts on restaurant menus for a primer in unintended consequences.

The health-care bill President Obama signed into law last March required all US restaurants with at least 20 locations to post calorie counts for each item on their menus.

The move affected most every chain in existence -- from traditional fast food franchises such as McDonald's, Wendy's (WEN), Taco Bell (YUM), Jack in the Box (JACK) and the like, to gourmet coffee Goliath Starbucks (SBUX) and fast-casual names like the Olive Garden (DRI) and Denny's (DENN) -- though it didn't quite work.

A team of NYU School of Medicine professors along with researchers from Yale found that people actually ordered higher-calorie meals after posting calorie counts became law.

Before the law, customers' orders contained an average of 825 calories.

After the law, that figure jumped to 846 calories.

Dr. Brian Elbel, Ph.D., MPH, who led the study, told me in a telephone interview that the 21-calorie jump can be attributed to “statistical noise” but the upshot of the findings is that posting calorie counts made no difference at all.

Elbel further pointed out that only 54% people actually recalled seeing the caloric information, and of that 54%, only 27% said the information mattered to them.

Yes, America has an obesity problem -- as does the rest of the world. A British report out last year described extra-wide ambulances in Wales fitted with reinforced stretchers and winches to lift patients into the vehicles and standard surgical instruments as being too short to reach through impossibly thick layers of fat.

So, will the "Healthy Meal Incentives Ordinance” make a dent?

From SF Weekly's Eskenazi:

The great irony of San Francisco's Happy Meal ban is that it's the legislative equivalent of a Happy Meal. It's a small and cheap attempt at something substantive; it feels good going down, like consuming a greasy burger and fries. But feeling good and doing good aren't synonymous. Data from a recent survey of Americans' fast food choices indicates banning toys from fast food meals won't help San Francisco's youth.

Indeed, Adam Powell suspects the new philanthropic aspect to Happy Meal transactions might actually help America's fast food companies.

Says Powell:

“San Francisco's law could very well prove an opportunity for various chains to make their pet charities more visible."

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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