Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Fries with your burger? Please. Extra cheese? Sure. E. coli? Errr, hard pass.
Heading into this week, McDonald’s main problem was winning back cash-strapped customers and convincing them that its restaurants still offer plenty of value for money. Now it has to reassure them that its food is safe to eat as well.
An E. coli outbreak in the US linked to the company’s popular Quarter Pounder hamburger had led to one death and made at least 49 people sick across 10 states, food safety officials said.
The news and the $11.5bn one-day drop in McDonald’s market value naturally bring to mind Chipotle Mexican Grill and its years-long battle with its own food safety crisis. Those outbreaks affected more than 1,100 people in the US between 2015 and 2018 and ultimately cost the then chief executive his job. The stock lost two-thirds of its value during the period. Chipotle had to pay a $25mn fine to resolve criminal charges that it served customers tainted food. It also took years for the company to win back customers.
Chipotle’s problems were complicated. It was not just one type of foodborne illness at one particular store. It was multiple ones — norovirus, salmonella and E. coli — at different times and across many different states.
It is still early days. But there are reasons to think the outbreak at McDonald’s could end up being more contained. Health officials suspect the slivered onions or beef patties used in the Quarter Pounders could be the source of the outbreak. McDonald’s said the onions came from a single supplier and were processed at a single facility. This means if onion was the culprit then the remedy should be relatively straightforward.
McDonald’s has also been quick to respond to the crisis. The fast-food chain has already removed the Quarter Pounder from menus in all or part of a dozen Midwestern or mountain states. As soon as it can, it needs to explain what happened, what action was taken in response and what changes it will make to ensure a similar outbreak does not occur again.
The risk is that none of that may matter. Inflation-weary diners who were slowly being lured back by the chain’s $5 meal deals are likely to think twice before eating at the Golden Arches again. Like-for-like sales in the US — down 0.7 per cent in the second quarter — will struggle in the short term. McDonald’s shares, having rallied by more than a fifth since the summer to touch a new high this month, are still trading on 25 times forward earnings, in line with its five-year average. There is little in the way of upside on the menu.
