McDonald’s E. Coli outbreak sends the stock on pace for its worst day since Covid
New York
CNN
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The company's stock plunged 8% in premarket trading, the worst day since March 12, 2020, when the world went into Covid lockdown.
McDonald's (MCD) stock is on pace for its worst day since the pandemic after an E. coli outbreak tied to Quarter Pounders in the western part of the United States left one dead and 10 hospitalized.
The US Centers for Disease Control and Prevention issued a food safety alert Tuesday, reporting at least 49 illnesses across 10 states. Most of the illnesses are in Colorado and Nebraska, and most of the people who fell ill ate Quarter Pounders at McDonald's.
The incident, and investors' immediate dash to the exits, recalls Chipotle's yearslong battle with E. coli and norovirus outbreaks at multiple locations starting in the summer of 2015. Over the course of three years, during which Chipotle repeatedly failed to contain numerous outbreaks, the once high-flying stock cratered, losing two thirds of its value.
Chipotle ultimately faced minimal fines, $25 million from the US Food and Drug Administration in 2020, but it struggled to win back grossed-out customers. The company eventually hired a new CEO, Brian Niccol, who just last month started a new stint at Starbucks. Niccol helped turn Chipotle around in 2018 by retraining the company's food handlers to promote safety. The company also tested employees on food safety standards.
A year after Niccol started, the company's stock fully recovered from its three-year outbreak nightmare.
Chipotle's outbreak is the worst-case scenario for any restaurant chain, and McDonald's E. coli situation appears to be limited, at least for now, to a supply issue. Slivered onions were probably the source of contamination, the US Food and Drug Administration found, and McDonald's has stopped using the onions and quarter-pound beef patties in several states, the CDC says.
Still, the investigation continues, and investors are on edge. The company in a statement said it was taking quick and decisive action to prevent the outbreak from spreading.
"Across the McDonald's System, serving customers safely in every single restaurant, each and every day, is our top priority and something we'll never compromise on," the company said.
McDonald's is no stranger to food-related scandal. In December 2003, a McDonald's supplier was found to have an incident of mad cow disease, sending the stock momentarily plunging. The company later that month said it found no evidence that customers were avoiding the restaurant chain because of that isolated incident.
In 2004, filmmaker Morgan Spurlock's smash-hit documentary "Super Size Me" sharply criticized McDonald's for serving unhealthy food. The film and its subject matter gained significant media attention, and McDonald's later that year ditched its supersize menu options. But investors were unphased: The stock rose about a quarter that year.
In 2011, the company was found to have used a kind of beef colloquially known as "pink slime, "treated with a chemical known as ammonium hydroxide. The company announced the next year it no longer uses pink slime, but rumors of continued use plagued the company for a decade, and McDonald's had to release another statement in 2021 to set the record straight.
But McDonald's most famous food-related scandal was the 1992 hot coffee lawsuit, in which a woman spilled coffee on her lap and suffered third-degree burns. A jury agreed with her contention that the coffee was unreasonably hot, which it was, according to the American Museum of Tort Law. The coffee was "30 to 40 degrees hotter than coffee served by other companies," the law museum said. The plaintiff in that case was initially awarded nearly $3 million, but she settled for less, around $480,000 after an appeal.
