Disney drops McDonald's deal amid health fears

For McDonald's, the tie-up with Disney and its production line of cartoon characters has been a marvel for attracting young children to the golden arches.

For Disney, the partnership offered free advertising for blockbuster films and income believed to be in the region of $1bn (£530m). Yet a marriage seemingly made in commercial heaven is ending in divorce, or at the very least a trial separation. Disney, the world's biggest children's entertainment company, is ending its 10-year exclusive partnership with the world's biggest fast-food company. Both parties insist it is a "mutual" decision that will allow each to seek more profitable promotions at the lucrative meeting point of food and fantasy.

Growing concern over an obesity epidemic - one in three Americans and one in five Britons are classed as overweight - may have proved decisive. According to a report in the Los Angeles Times, Disney has become increasingly worried that its links to McDonald's would damage its family friendly image. The newspaper cited "multiple high-ranking sources" in the company and quoted the Apple Computers boss, Steve Jobs, who became Disney's largest shareholder after its takeover of Pixar. Mr Jobs said during a conference call: "There is value in fast-food tie-ins. But there are also some concerns, as our society becomes more conscious of some of the implications of fast food."

The Happy Meal partnership will be broken up after McDonald's promotes two Disney films this summer, Cars and the sequel to Pirates of the Caribbean. Its termination will allow McDonald's to seek other Hollywood films to attract children.

For its part, McDonald's may have wanted to avoid serving up some of Disney's turkeys, being linked to box-office flops such as Treasure Planet.

A statement from McDonald's dismissed the LA Times' report as completely inaccurate. "McDonald's did not exercise our option to renew the agreement in 2004 based on our wish for more flexibility in our entertainment relationships. This decision enabled us to announce a two-year DreamWorks agreement, which was widely reported in July last year," it said.

But that deal could also be in doubt. The LA Times said a source at DreamWorks, the studio behind Shrek, suggested there was internal debate as to whether the green ogre would be damaged by an association with McDonald's. Disney said it was looking forward to working with McDonald's on a "more flexible, non-exclusive basis".

The new era comes at a tough time for McDonald's with the publication of Chew On This, Eric Schlosser's children's version of his exploration of the fast-food business, Fast Food Nation. A feature film of Fast Food Nation starring Avril Lavigne and Patricia Arquette is scheduled for release this year.

Which?, formerly the Consumers' Association, which has campaigned against the "tricks" that food companies use to market sugary and fatty products to children, said Disney should have gone further.

"Disney has missed an opportunity to sever its ties with junk food altogether," Which? said. "So many of the foods Disney chooses to promote its characters are packed with fat, sugar and salt".