McDonald’s Under Fire: E. Coli Outbreak Spreads!

McDonald's Under Fire: E. Coli Outbreak Spreads!
McDonald's Under Fire: E. Coli Outbreak Spreads!

United States: Shares of McDonald’s dropped nearly 6 percent after an E. coli outbreak linked to their Quarter Pounder hamburgers. This outbreak has sadly resulted in the death of one person and has made 49 others sick across the U.S.

The outbreak has like almost affected 10 states, and at least 10 people who have been hospitalized till now, reports of illnesses started in late September and continued into October. It’s a serious situation that highlights the importance of food safety!

As reported by Reuters, “This public health scare is the last thing McDonald’s needs bearing in mind that it has been experiencing a feast to grow,” said Hargreaves Lansdown head of money and markets Susannah Streeter.

The E. coli O157:H7 strain that led to the McDonald’s outbreak is said to cause serious illness and is the same as the strain that was implicated in the December 1993 case at Jack in the Box food chain that killed four children.

The infection could have been precipitated by slivered onions used in the preparation of of the Quarter Pounder, which, McDonalds stated, came from a single vendor that supplies three depot centers.

Earlier, two devastating E. Colilities – one at Chipotle fast food joint in 2015 and another at Jack in the Box restaurant in 1993 affected sales severely.

It took Chipotle 1.5 years to steady itself and during that time, Jack in the Box was dealing with its sales slump – its sales went down for four consecutive quarters, according to Raymond James analyst Brian Vaccaro.

McDonald recently reported the first quarterly sales decline internationally in more than three years, in the month of July, where the McDonald consumers demanded more bargains due to the increased prices of its products.

Some analysts said McDonald’s may face certain impact to its fourth quarter sales due to the outbreak however it is still to early to predict it to be worse than the previous two E.coli cases.

J.P. Morgan analysts in a note said that the company’s decision to immediately identify the origin of the outbreak and restock supplies should rectify the issue and it does not predict this to “swallow the United States or definitively global”.

McDonald’s said it has shelved slivered onions and beef patties used in the Quarter Pounder and also stopped the sale of the burgers at centers in the affected areas.

While it is early historical precedent suggest comp and pressures can trough quickly and probe transitory, assuming no recurrence BMO Capital Markets analyst Andrew Strelzik said.

The timing was unfortunate for the McDonald’s and its investors he said, as U.S. comparable sales had just begun to accelerate following the launch of almost 5 USD value meals.