How McDonald's capitalizes on the McRib

Mike Dang  |  05:29 PM, Friday, November 11, 2011

It comes and goes like a reunion tour by the Rolling Stones, or the Beach Boys. I'm talking about the McRib — the BBQ sauce-slathered rectangle of pork sandwich McDonald's retires and brings back for a "limited time only" every few years. And like fans who flock to reunion tours, fans of the McRib scour maps and are willing to drive long distances to get their hands on the limited edition sandwich.

But a seemingly random limited release of the McRib by McDonald's may actually be a calculated way to make money during times when pork prices are low, according to this terrific article by The Awl:

Arbitrage is a risk-free way of making money by exploiting the difference between the price of a given good on two different markets—it’s the proverbial free lunch you were told doesn’t exist. In this equation, the undervalued good in question is hog meat, and McDonald’s exploits the value differential between pork’s cash price on the commodities market and in the Quick-Service Restaurant market. If you ignore the fact that this is, by definition, not arbitrage because the McRib is a value-added product, and that there is risk all over the place, this can lead to some interesting conclusions. (If you don’t want to do something so reckless, then stop here.)

The theory that the McRib’s elusiveness is a direct result of the vagaries of the cash price for hog meat in the States is simple: in this thinking, the product is only introduced when pork prices are low enough to ensure McDonald’s can turn a profit on the product. The theory is especially convincing given the McRib's status as the only non-breakfast fast food pork item: why wouldn't there be a pork sandwich in every chain, if it were profitable?

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.

Its a very fascinating theory, is it not? But a German commenter of the article writes the following: "In Germany the McRib is available all year round, so that renders those theories moot, at least in Germany." Do McRib enthusiasts have enough McLove to move to Germany?

h/t: The Awl

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