Restaurant Brands Switches to Antibiotic-free Chickens

Joins rivals McDonald’s and Wendy’s in sourcing drug-free poultry for its restaurants

q1Restaurant Brands International Inc. (NYSE: QSR), the Oakville, Ontario-based company that owns and operates restaurants under the Burger King and Tim Hortons brand names, plans to make the switch to chickens raised with fewer antibiotics in the US in 2017. The Company will also to expand this decision to include chickens in Canada in 2018, as reported by Reuters on December 29th, 2016.

Restaurant Brands International is one of the world’s largest quick service restaurant (QSR) companies with more than $24 billion in system-wide sales and over 19,000 restaurants in more than 100 countries and US territories. The Company’s latest move comes after its rivals McDonald’s Corp. (NYSE: MCD), The Wendy’s Company (NASDAQ: WEN), Chipotle Mexican Grill Inc. (NYSE: CMG) and Five Guys Burgers and Fries have also taken similar steps after being faced with backlash from investors and consumers in recent months.

Superbugs on the rise

The growing need to curb antibiotic usage assumes significance since it is estimated that about 70% of antibiotics that are used to fight human infections and ensure the safety of invasive procedures such as surgeries are being used in meat and dairy production. There is also a growing concern among scientists, public health experts, consumers, and shareholders that the overuse of such drugs is contributing to rising numbers of life-threatening human infections from antibiotic-resistant bacteria dubbed superbugs. The US Centers for Disease Control and Prevention estimates that at least 2 million people in the US are infected with drug-resistant bacteria each year and that 23,000 die as a direct result.

In this regard, health advocacy group As You Sow has been working with Restaurant Brands on its antibiotics policy for more than a year. In February 2016, the group withdrew a shareholder proposal calling on the Company to develop a stricter policy after Restaurant Brands agreed to address the issue before the end of 2016.

Shift in consumer preferences

Public health experts have long been concerned that routine feeding of certain antibiotics to poultry and livestock could lead to antibiotic-resistant superbugs, seen as a health hazard for humans. Finding meat raised in the US without antibiotics has become a major challenge for food companies. Tyson Foods Inc. (NYSE: TSN) and Pilgrim’s Pride Corp. (NASDAQ: PPC), the two largest chicken meat producers in the US, intend to remove antibiotics important to human medicine from their flocks by September 2017.

Chicken meat producers are also converting their plants to process certified organic chicken that are on par with organic naturally antibiotic free (NABF) standards. Organic chicken now makes up about 2% of total commercial production in the US, and given the growing concerns among consumers, this category is growing at a faster clip of 31% CAGR. US producers of broiler chickens slaughter 1.9 million birds and process about 9 million pounds of chicken weekly, according to Watt PoultryUSA and as reported by Reuters.

Other QSRs follow suit

Bowing to consumer concerns, McDonald’s has already removed all antibiotics important to human medicine from its US chicken supply chain. Under CEO Steve Easterbrook, McDonald’s is working to change customer perceptions by switching to cage-free eggs and chicken free of certain antibiotics, as well as removing preservatives from menu items including Chicken McNuggets.

Wendy’s announced in August 2016 that it would quit using chickens raised with antibiotics important to human health by 2017.

Yum! Brands Inc. (NYSE: YUM), owner of the Pizza Hut, KFC, and Taco Bell fast-food chains, is the latest fast food vendor to make a move on curbing antibiotic use. KFC has far more restaurants than any other fast-food chicken chain. Following the trend, Chick-fil-A has committed to switch to chicken raised without any antibiotics by the end of 2019.

Stock Performance

q2Restaurant Brands International’s stock stood at $47.66, slipping 0.54%, at the close on Friday, December 30th, 2016, having vacillated between an intraday high of $48.10 and a low of $47.49 during the session. The stock’s trading volume was at 224,184 for the day. The Company’s market cap was at $11.16 billion as of Friday’s close.

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