October 23, 2024
McDonald’s shares fell the steepest in April since March 2020 on Wednesday as the fast-food chain was dealing with a lethal E.coli outbreak relating to its Quarter Pounder burgers. It’s a pandemic that’s already killed one and infected nearly 50 in several states, and McDonald’s was quick to help contain the outbreak. But some are wondering if this health crisis is just a fluke — or part of a broader political backlash against the company after a franchisee hosted former President Donald Trump at a McDonald’s location.
E. Coli Outbreak and McDonald’s Response
Joe Erlinger, President of McDonald’s USA, commented on the situation during an appearance on NBC’s Today show to stress that the company was regaining the American public’s trust. “Given the recent events of the past 24 hours, our priority is to reinforce the confidence of American consumers,” Erlinger said referring to McDonald’s removal of Quarter Pounders from their stores in impacted regions.
In 10 West and Midwest states — Colorado, Kansas, Utah, Wyoming, parts of Idaho and Nebraska — the outbreak has caused 10 hospitalizations and one death. The US Centers for Disease Control and Prevention (CDC) is trying to determine where the contamination is coming from: slivered onions and Quarter Pounder patties. And despite regular product tests by McDonald’s suppliers, no one has determined exactly what is causing the E. coli outbreak.
McDonald’s quick reactivity – removing Quarter Pounders from menus at more than 2,800 stores, and coordinating with health authorities – will keep the decline from lasting too long. But investors have already come back on strong, and shares are down 4.8% in early afternoon.
Political Repercussions or Coincidence?
Even the timing of the outbreak has caused some to wonder if this crisis is political revenge against McDonald’s. Two days before the outbreak, a McDonald’s franchisee treated former President Donald Trump to a rally in Harrisburg, Pennsylvania. Is the outbreak a government retribution for McDonald’s Trump support?
Critics have pointed to historical instances where authoritarian regimes have weaponized government agencies to punish corporations or individuals for political reasons. Is this outbreak part of a pattern of politically motivated retribution in the U.S.?
Corporate America and the Federal Government have also become entangled in recent years, with charges of political slant popping up at every corner of public and private life. There isn’t any clear evidence that the E coli outbreak was driven by politics, but the speculative nature of it shows how many Americans do not trust government institutions today.
Historical Parallels
It is the same strategy that has been used in other authoritarian governments, where authorities have used the power of regulation to punish businesses. And whether this is happening in the U.S. is another question, but the scale of the outbreak and the speed with which it has engulfed McDonald’s operations has left many wondering if there’s more to it than meets the eye.
The two worst E. coli outbreaks in the history of U.S. fast food, Chipotle in 2015 and Jack in the Box in 1993, severely damaged both chains. Chipotle shares lost nearly half in the wake of the outbreak and Jack in the Box saw sales plummet for four quarters in a row. Both firms were heavily scrutinized but no politics were involved. By contrast, McDonald’s recent encounter with Trump might be putting yet more complicated strings in the fast-food company’s bow.
What’s Next for McDonald’s?
Analysts don’t feel comfortable at McDonald’s next move and some think the outbreak could impact fourth-quarter sales. Though JP Morgan analysts said McDonald’s speed of response might be enough to put the damage in place, the strain of E coli responsible for this outbreak is particularly lethal — it’s the same strain that killed four children in the 1993 Jack in the Box outbreak.
McDonald’s shares, however, have been battered hard. The stock dropped to $290.88 on Wednesday and the market is rocking back and forth as the company struggles to regain control. The fast-food chain, who couldn’t have done any better, has no easy way back.
As the investigation into the outbreak continues, one question looms large: is this a public health crisis, or could it also be the government’s subtle way of sending a political message to McDonald’s for its perceived alignment with Donald Trump?
Sources:
- NBC’s Today Show
- CDC E Coli Outbreak Report
- Hargreaves Lansdown Analysis
- Chipotle E. Coli Outbreak
- Jack in the Box 1993 E Coli Outbreak
