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Sat, May 24, 2003 - Page 12 News List

McDonald's reassures investors

BRAND REVITALIZATION The global chain, although struggling with depressed sales and a damaged image, still retains its place as the world's No. 1 burger chain

NY TIMES NEWS SERVICE , OAKBROOK, ILLINOIS

In his first face-to-face meeting with shareholders, James Cantalupo, McDonald's new chief executive, tried Thursday to play down concerns about mad cow disease in Canada and focus instead on his plan to revitalize the brand.

"McDonald's has tremendous experience in food safety," said Cantalupo, addressing shareholders at McLodge, a hotel on McDonald's corporate campus here. "We have a proven track record in dealing with concerns like this."

In recent years, sales at Mc-Donald's restaurants in Japan and Europe fell sharply after outbreaks of mad cow disease. But so far, the company said, sales at North American operations do not appear to be affected by the discovery of a single case of the disease in a dead cow in Alberta. In Canada, McDon-ald's said sales increased a few percentage points at its restaurants on Wednesday, the day after announcement.

Cantalupo, who worked at McDonald's for 27 years, came out of retirement in January to succeed Jack Greenberg. Because his predecessor was unable to reverse slumping sales, Cantalupo has focused much of his efforts since then on rebuilding the McDonald's brand. Like many burger chains, McDonald's has had declining sales in recent years as consumers have begun to favor healthier food options, upscale eateries and ethnic food outlets.

To reignite interest in McDon-ald's, which though struggling is still the No. 1 hamburger chain in the nation, Cantalupo and his management team have pledged to slow the building of restaurants in favor of cultivating relationships with new and old customers.

The goal, Cantalupo told shareholders, is to significantly improve customer service, food offerings and the overall cleanliness and appearance of restaurants.

While some of the McDonald's menu will be eliminated, several products will be added including McGriddles, breakfast pancake sandwiches. The company is also trying to shed its image as a purveyor of unhealthy food with new premium salads topped with warm chicken and Newman's Own salad dressing and healthier Happy Meals, which are available in some countries with the option of milk and sugarless juice instead of soda and miniature bags of fresh fruit.

The company will also reorganize its marketing campaigns to include greater participation from Ronald McDonald, update its hamburger seasonings and buns and trim operating costs by installing automatic beverage machines and self-ordering kiosks, executives said.

Cantalupo also renewed his pledge to achieve 3 percent to 5 percent growth in sales and a 6 percent to 7 percent increase in operating income by 2005. He said the company would buy back shares and increase the dividend.

Among the questions addressed by shareholders was one on how the company was being affected by SARS. Cantalupo said only a small percentage of McDonald's total business was in markets that had been affected by SARS. Business in those markets was rebounding, he said.

Cantalupo also sought to dispel rumors that the company's partner brands, Chipotle Mexican Grill, Boston Market and Donatos Pizzeria, are on the auction block.

"There's no for-sale signs on the partner brands," said Cantalupo, who insisted that the company was performing a strategic review of its entire business. "Everything is on the table, and we're looking at everything. We continue to do that."

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