Is McDonalds' McRib Sandwich Really a Commodity Trade Rather Than a Menu Item?

Juicy. Both the information and the sandwich.

The issue: what if McDonald's only reintroduces its cult favorite McRib pork barbecue sandwich product when commodity price swings provide profit opportunities?

This is what we call exploiting information asymmetries. That means that when a company like McDonalds discovers a nugget of data (the information) that none of its competitors has (the asymmetry) -or simply has the wherewithal due to its market heft, it takes advantage of it in order to enhance its profits. There is nothing illegal or unethical about this, but for some, it may tarnish some of the 'magic' of the menu mystique.

Alas, this has been the case throughout the company's history. During the company's early days, insiders used to refer knowkingly to the real money maker not as the hamburger or Big Mac but as the 'Real Estate Sandwich.' What they meant was that McDonald's speculated in real estate, buying likely restaurant sites during the country's great suburban expansion and then leasing or selling them at a handsome profit to franchisees.

But fear not, happy McRib devotees. Pork prices rise and fall. The McRib may disappear again for a time, but economic cycles assure that it will reappear. JL

Simone Foxman reports in Business Insider:

The McRib is back—but not to satisfy your taste buds.

The elusive sandwich is really just a McDonald's commodity trade at the right market moment, according to The Awl's Willey Staley. The sandwich has been springing up on the fast food chain's menu since 1981 or 1982, and almost always corresponds with a trough in the price of hogs.

Because McDonalds must buy millions of pounds of pork to support the sale, a small dip in its price could mean huge savings for the company—enough to make the product sufficiently profitable to revive. Such a decision generally coincides with the fall season, which is a cyclical low for hog prices.

While Staley says he can't point to more than a correlation here, he argues that there are lots of good reasons for McDonalds to behave more like a trader than a restaurant:

Fast food involves both hideously violent economies of scale and sad, sad end users who volunteer to be taken advantage of. What makes the McRib different from this everyday horror is that a) McDonald’s is huge to the point that it’s more useful to think of it as a company trading in commodities than it is to think of it as a chain of restaurants b) it is made of pork, which makes it a unique product in the QSR world and c) it is only available sometimes, but refuses to go away entirely.

If you can demonstrate that McDonald’s only introduces the sandwich when pork prices are lower than usual, then you’re but a couple logical steps from concluding that McDonald’s is essentially exploiting a market imbalance between what normal food producers are willing to pay for hog meat at certain times of the year, and what Americans are willing to pay for it once it is processed, molded into illogically anatomical shapes, and slathered in HFCS-rich BBQ sauce.