What is the True Cost of a McDonald’s Value Meal?
Why should we care about the True Cost of a Value Meal?
Obesity and the American Diet have received plenty of attention for the corollary relationship between high consumption of sugars and saturated fats and the alarming rates of obesity and obesity related diseases. According to the World Health Organization, in 2007, the obesity rate in USA was 31%. For comparison, the obesity rate in Japan was 3% (OECD Health Data, 2010). Additionally, the cost of health care associated with obesity is 43% more (Reinberg, 2009). The US pays three times more for health care than Japan (United Nations Development Programme). With policy makers arguing over the US health care system overhaul and ways to fund it, perhaps they should take a systems view and look at the “American Diet” as a leverage point in changing our health care crisis.
The truth is that the American Diet is quite diverse and every American eats very differently. However, McDonalds is an iconic representation of the “American Diet” and makes a good case study. The McDonalds Value Meal consists of a ¼ pound burger with cheese, a large fries and Coca Cola (McDonalds). The Value Meal has 1,360 calories: The burger contains 510 calories, the fries have 540 calories and the coke has 310 calories. Many people in the U.S. eat this on a regular basis, but this trend is spreading worldwide. In the US, the Value Meal costs around $6.50.
In 2008, McDonalds opened a new Store in Osaka that served the quarter-pounder with a value meal. The opening day saw 15,000 customers (OMG, 2008). In reading this story, I started to wonder: What would Japanese health care costs look like if Japanese people started eating like Americans? What would the impact be if the Japanese population switched from eating a traditional bento box to a Value Meal?
In answering this question, there were many broad and inaccurate assumptions. The calculated externalities were the additional health cost per burger and the additional carbon cost per burger, assuming that Osaka customers switched to eating a McDonalds Value Meal 5 days per week and paid the going price of $7.09 in US dollars. After my research and calculations, I found out that the externalized costs to society (health and environment) were $1.49 more than the actual price for the Value Meal.
Disclaimer: This is only an exercise to explore an idea around internalizing externalities . . . and in no way do I claim that these numbers are accurate. Too much data is missing to make an accurate life cycle cost analysis on a Value Meal.
My Research and Calculations
The product lifecycle starts with the recipe. The recipe sources potatoes mostly from the USA, tomatoes from Mexico, beef from Brazil (where the rainforest is being slashed and burned to make way for more range land), sugar cane from all over the world. All of these products are shipped and trucked to multiple processing facilities, then shipped and trucked to McDonalds restaurants, where they are made into “food.” Then the food portion is consumed, the paper, packaging, and waste portions are sent to a landfill.
Since there was limited data on much of the life cycle of a Value Meal, this analysis only reflects the easily available data, which was health care costs and carbon footprint of the burger itself (not including transport). This analysis also ignores a multitude of environmental impacts (such as water contamination from agricultural runoff, etc). It doesn’t account for packaging and end of life. It just looks at carbon and long term health care costs associated with obesity. It assumes that Japanese food is grown locally, with the associated low carbon footprint (this is based on knowledge that Japan has a robust agricultural infrastructure). It assumes one McDonalds meal (which includes large fries and drink) is eaten five days per week. The tabulated analysis and comparison follows:
While this highly inaccurate analysis makes some sweeping assumptions and calculates correlated externalities as though there were a direct causal link, it does highlight some interesting data. It illustrates that the price we pay for a product may not reflect its true cost. Even with insufficient data, through a Life Cycle Cost Analysis, we can start to look at the magnitude of our impact and the ripple effect of our small every day actions. In truth, the impact of eating one Value Meal is small, but sustained over a long period of time, it adds up. So what does this mean for other products? It means that with sufficient data, we can start putting a true cost price tag on behaviors or products that free markets don’t add in.
Sources
United Nations Development Programme. Human Developemnt Report, 2007 . United Nations.
Dunn, C. (2006, December 27). The Carbon Footprint of a Burger. TreeHugger .
McDonalds. (n.d.). Extra Value Meals . Retrieved from www.mcdonalds.com: https://www.mcdonalds.com/us/en/food/meal_bundles/extra_value_meals.html
OECD Health Data. (2010, 10). OECD Health Data 2010- Frequently requested data. Retrieved 3 20, 2011, from OECD: www.oecd.org
OMG. (2008, December 27). Japanese Love McDonald’s Quarter Pounder with Cheese. Retrieved from Blogspot.com: https://yesboleh.blogspot.com/2008/12/japanese-love-mcdonaldsquarter-pounder.html
Serchuk, D. (2009, June 03). Calculating the True Cost of Carbon. Forbes .
Reinberg, S. (2009, July 27). Almost 10 percent of US Medical Costs Tied to Obesity . ABC News/Health .