McDonald’s faces a significant sales decline following an E. coli outbreak linked to onions in Quarter Pounders, prompting critical corrective actions.
Key Takeaways
- McDonald’s U.S. sales dropped 1.4% in Q4 due to the E. coli outbreak.
- The CDC ended its investigation into the outbreak with 104 cases reported.
- McDonald’s has taken corrective measures, including removing affected products.
- Sales declines were steeper than expected, leading to reassessment of value strategies.
- McDonald’s plans to boost consumer confidence with new promotional efforts.
Sales Impact and outbreak details
McDonald’s experienced a 1.4% decline in U.S. comparable sales for the fourth quarter, more severe than the anticipated 0.4% decrease. An E. coli outbreak, originating from slivered onions used in Quarter Pounders, significantly affected sales. Initiating in the Rocky Mountain region, the outbreak accounted for more than 100 confirmed cases and one fatality. The fast-food giant temporarily halted sales of the Quarter Pounders in affected restaurants and ceased onion purchases from impacted suppliers.
Federal health officials concluded their investigation on December 3, identifying the outbreak’s source. Distribution was traced back to a Colorado processing plant and a farm in Washington state. McDonald’s swift response included removing products from 900 outlets and addressing consumer safety. Despite these efforts, the economic loss and health implications demand a reassessment of supply chain strategies and preventive measures.
McDonald's to resume quarter pounder sales after E. coli outbreak https://t.co/q8PSGNmjwd
— Axios (@axios) October 28, 2024
Response and Recovery
In response, McDonald’s ramped up promotions and marketing strategies to offset losses. The introduction of limited-time offers, such as a $5 meal deal and the Chicken Big Mac, aimed to entice cautious consumers. Despite an uptick in customer visits, average spending per transaction waned due to the high-margin nature of the impacted Quarter Pounders. CEO Chris Kempczinski stated the company is “investing in value, affordability, and digital offers to regain consumer trust.”
“The impact of the E. coli outbreak linked to slivered onions on our Quarter Pounders.” – CEO Chris Kempczinski
The financial repercussions were notable, with McDonald’s net income dropping 5% to $2.04 billion, missing projected figures. In response, McDonald’s plans to further enhance its value programs in 2024, aiming for industry-leading affordability. BTIG analyst Peter Saleh emphasized the potential challenges of steering consumers away from deep discounts as a consistent strategy.
McDonald's announced Quarter Pounders will be on its menu at hundreds of its restaurants after testing ruled out beef patties as the source of the outbreak of E. coli poisoning.#newsalert #McDonaldsEColi https://t.co/bnB1DhL5Lm
— CBS2 News (@CBS2Boise) October 28, 2024
Path to driving future growth
McDonald’s international operations yielded more optimistic results, with a 4.1% rise in comparable sales led by growth in the Middle East and Japan. However, the domestic market remains a focus, with strategies tailored for recovering from food safety issues by the fiscal second quarter.
“In our view, the challenge McDonald’s faces in the months and quarters ahead will be weaning customers off these deep discounts…” – BTIG analyst Peter Saleh
With the outbreak now considered “closed,” McDonald’s is focused on rebuilding its reputation and customer trust. The corporation’s commitment extends to comprehensive value propositions and boosting digital engagement, ensuring its efforts resonate with concerned patrons. As McDonald’s navigates these turbulent waters, the lessons learned from this incident will inevitably shape future policies and procedures to safeguard both public health and corporate stability.
Sources
1. McDonald’s posts biggest US sales decline in nearly five years
2. McDonald’s takes massive sales hit from E. coli outbreak
