McDonalds: Burgers, bacteria and market bombing


By Dr. Tim Sandle
DIGITAL JOURNAL
October 24, 2024

Delivery workers gather at a McDonald restaurant to pick up orders in Kyiv - Copyright AFP Peter PARKS

McDonald’s Quarter Pounders are temporarily unavailable in some states across the U.S. due to an outbreak of Escherichia coli food poisoning. There has been one confirmed death from the toxin the bacterium produces, according to the BBC. In addition, one child is in hospital with haemolytic uremic syndrome, which can cause kidney failure.

The U.S. Centers for Disease Control and Prevention (CDC) has issued a food safety alert regarding an E. coli outbreak linked to one of the fast food chain’s most popular burgers. There are currently 49 recorded cases of E. coli across 10 different states: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, Oregon, Utah, Wisconsin and Wyoming.

McDonald’s is working with public health officials to determine the contaminated ingredient. Given there are multiple suppliers for the beef patties, and these a cooked to a high temperature, these are unlikely to be cause. One commonality is all affected restaurants shared a single supplier of onions (California-based Taylor Farms, one of the world’s largest vegetable processors). This is currently the main line of inquiry.

Meanwhile, McDonald’s shares are losing almost 7 percent. According to Hani Abuagla Senior Market Analyst at XTB MENA: “Historically, this is not the first situation of this type at McDonald’s, and each time the decline in share prices or sales resulting from similar ‘scandals’ turned out to be temporary, looking at the long-term horizon.”

Abuagla has provided his thoughts to Digital Journal.

Will this be the case on this occasion? Abuagla is not so sure: “This time, however, we are dealing with a number of negative factors. After a weaker second quarter of the year, the company has already announced that 2025 promises to be a ‘challenging year’, and an important driver of its growth was the ‘strong’ market in North America, where the ‘$5 meal’ recently debuted.”

Drawing some parallels, Abuagla observes: “Looking at the historical examples of E. coli poisonings at Chipotle (2015) and Jack in The Box (1993), comparable sales in the first case stabilized only after 1.5 years, and in the second case they fell for 4 quarters in a row.”

In terms of output, Abuagla predicts: “We can expect demand for McDonald’s meals to actually subside for some time as shares slide from all-time highs. Another aspect is the actual number of victims, which may increase, and possible legal costs.”

Yet there is more hope in the longer term since “the situation does not threaten the foundations of the chain’s business, and consumers are aware of the scale at which McDonald’s operates. Taking this into account, individual cases of poisoning do not invalidate the standards throughout the company. Nevertheless, the confirmed death may capture the imagination of consumers looking for alternatives to the Internet.”

Economic data will soon be available. Abuagla states: “The company will present its results on October 29, and if they also disappoint, we can expect a stronger downward impulse.”