Following an E. coli outbreak linked to onions in Quarter Pounders, McDonald’s experiences a significant decline in U.S. sales, prompting strategic changes.
Key Takeaways
- McDonald’s U.S. comparable sales fell 1.4% in Q4, exceeding the expected 0.4% drop.
- The E.coli outbreak, traced to onions, resulted in 104 cases across 14 states.
- McDonald’s has temporarily removed Quarter Pounders from select menus.
- Company aims to recover by enhancing value and digital offering to regain trust.
The Impact of the E. Coli Outbreak
McDonald’s U.S. sales declined by 1.4% in the fourth quarter due to an E. coli outbreak linked to onions in its Quarter Pounders. The outbreak, starting October 22, affected 104 individuals across 14 states, resulting in one death. McDonald’s took immediate action by suspending Quarter Pounder sales in 20% of its restaurants and discontinuing purchases from the involved onion supplier.
The Centers for Disease Control and Prevention concluded its investigation on December 3. McDonald’s efforts to counter the outbreak’s impact included removing Quarter Pounders from menus in 900 locations within the affected regions.
Quarter Pounders will again be on the menu at McDonald's after testing ruled out beef patties as the source of the outbreak of E. coli poisoning that killed one person and sickened at least 75 others across 13 states.https://t.co/UQvp0EO8de
— 13WHAM (@13WHAM) October 28, 2024
Steps Toward Recovery
McDonald’s is taking significant strides to regain consumer confidence post-outbreak. The company introduced limited-time offers and meal deals, extending a $5 meal deal and introducing the Chicken Big Mac. Despite an increase in customer traffic, average spending per visit decreased, raising concerns about prolonged reliance on discounts.
“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
Analysts warn that heavy discount reliance, which constitutes over a third of sales, might impact franchise profitability. Internationally, the company saw a 0.1% sales increase driven by strong markets in the Middle East and Japan. However, in the U.S., McDonald’s experts recognize the need for industry-leading value enhancements to counter waning consumer trust.
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
Looking Ahead
McDonald’s anticipates stabilizing from the quarter’s setbacks by the start of the fiscal second quarter. The firm is investing in value programs, affordability initiatives, and digital deals in hopes of restoring customer relations and financial standing. On an adjusted basis, McDonald’s reported net income of $2.04 billion, slightly underperforming the forecasted $2.07 billion, with $6.39 billion revenue short of estimates.
The strategic shift focuses on adapting to an environment characterized by declining restaurant foot traffic. McDonald’s U.S. decline marked the steepest since the pandemic’s peak, urging careful navigation through cost-effective consumer retention strategies while mitigating food safety concerns.
Sources
1. McDonald’s takes massive sales hit from E. coli outbreak
2. McDonald’s posts biggest US sales decline in nearly five years
