McDonald's: chicken off menu in Asia as sales slump persists

Jul 25, 2014

China meat scandal hits chain, as drop in profits suggests 'customers aren't lovin' McDonald's'

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McDonald's has had a tough week with a "rotten meat" scandal and slumping profits, and now business analysts are suggesting that its golden arches are losing their shine.

Shanghai Husi Food, a supplier to McDonald's and several other food outlets in Asia, was accused over the weekend of using out-of-date meat and re-adding offal that had fallen on the floor.

Hundreds of McDonald's restaurants in China and Japan have had to suspend McNuggets, other chicken products and, bizarrely, lemon tea from their menus as new suppliers are sourced.

The scandal comes as McDonald's revealed its net income fell by one per cent to $1.39bn in the quarter ending in June. Shares in the chain tumbled by more than two per cent after the announcement in early trading on Tuesday. While the UK has recorded 33 consecutive quarters of unbroken sales growth, overall sales in Europe and the US have slumped.

Harry Wallop in the Daily Telegraph says the latest figures confirm a "worrying" trend: "Customers aren't lovin' McDonald's."

The company was at "rock bottom" in 2003 before flourishing again with a refreshed menu and meal deals, but since the end of 2012 sales growth has "rarely moved above one per cent a quarter, and profits have made little progress", says Wallop.

Nassos Stylianou at City AM says that, compared with its rivals, McDonald's seems "unable to halt the slide". Burrito chain Chipotle Mexican Grill announced a 17.3 per cent jump this week, Burger King shares have surged and Yum's Taco Bell has reportedly started "eating into the US breakfast market that McDonald's had dominated for more than three decades", says Stylianou.

"Near-term results are expected to remain muted," McDonald's CEO Don Thompson admitted in a statement on Tuesday.

"That's akin to cold fries," says Matt Egan at CNN. With people opting for healthier options and the meat scandal in Asia threatening to "dent sales in its lone growth segment", Egan is not expecting a turnaround anytime soon. "If there's a restaurant 'it' list, McDonald's isn't on it."

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