McDonald’s E. coli outbreak is spooking investors
Investors are dreading a repeat of Chipotle’s 2015 outbreak.
McDonald’s stock is down nearly 6% the morning after the Centers for Disease Control and Prevention announced that it was investigating an E. coli outbreak tied to the burger chain’s Quarter Pounder.
While analysts seem to agree that McDonald’s will at least suffer a short-term hit to its market cap, it’s way too early to tell if it will end up in the hall of fame of food-safety scandals. Investors’ biggest fear is that it will come close to what Chipotle experienced in 2015.
The timing isn’t great for McDonald’s, either. The chain has been struggling to lure customers back after price hikes turned consumers off from fast food.
Starting in the summer of 2015, Chipotle embarked on a years-long battle with E. coli and norovirus outbreaks at multiple locations. Ultimately, 1,100 people were impacted and Chipotle agreed to pay a $25 million fine, the largest-ever fine in a food-safety case at the time. (Family Dollar now holds that ignominious crown.)
Chipotle took a huge hit to its market cap, and it didn’t reach its pre-outbreak price until 2019.
The current McDonald’s outbreak consists of 49 cases spread over 10 states, with one reported death and 10 reported hospitalizations, according to the CDC. In a statement, McDonald’s said the illnesses may be linked to slivered onions used in the Quarter Pounder, which it’s taken off the menu in affected states.
While the company is doing what it can to contain the outbreak, “the headlines will have a negative impact on the business amidst a difficult period for fast food that follows years of bumper growth and robust profits,” analysts at Bespoke Investment Group wrote.
Analysts at UBS said they expect the sales impact to be “more limited” and seemingly comparable to the E. coli outbreak experienced by Wendy’s in 2022. That outbreak sickened 109 people and appeared to be tied to its lettuce.
