Value-focused menus continue to attract budget-conscious diners, as fast‑food chains lean into affordability while pricier rivals struggle.

The company’s Burger King chain introduced ‘2 for $5’ and ‘3 for $7’ value meal offers over the last year.

McDonald’s also topped estimates for its fourth-quarter global comparable sales and profit on Wednesday, helped by meal deals and strong marketing promotions.

Same-store sales at its Burger King outlets in the U.S. rose 2.6 per cent for the quarter.

It posted an adjusted profit of (U.S.) 96 cents per share for the quarter, topping estimates of 95 cents per share, according to data compiled by LSEG.

The company reported quarterly same-store sales growth of 3.1 per cent, compared with estimates of a 2.8 per cent rise.

— Reporting by Sanskriti Shekhar in Bengaluru

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Comparable sales in the U.S., McDonald’s biggest market, fell 1.4 per cent in the fourth quarter, its steepest drop since the height of the COVID-19 pandemic almost five years ago when restaurants limited operations to drive-thru and delivery.

Analysts on average had estimated a 0.4 per cent decline, according to data compiled by LSEG.

The burger giant saw customer visits weaken following an E.coli outbreak that started on October 22 and forced McDonald’s to temporarily suspend sales of its Quarter Pounder hamburgers in a fifth of its 14,000 U.S. restaurants.

The U.S. Centers for Disease Control and Prevention on December 3 ended its investigation of the incident, which sickened hundreds and killed at least one person.

Similar to fast-food rivals such as Yum Brands and Wendy’s, McDonald’s also ramped up its limited-time offers and meal deals throughout 2024 in an attempt to spur spending among customers preferring to eat meals at home.

The company extended its $5 meal deal launched in June into December and introduced Chicken Big Mac in October, along with other special releases.

Customer traffic ticked up slightly in the quarter from last year, McDonald’s reported, but that increase was offset by a smaller average amount spent per customer per visit.

Analysts have warned that the company’s overreliance on discounts, which now account for over a third of sales, according to BTIG analyst Peter Saleh, could pressure franchise margins in the future.

“In our view, the challenge McDonald’s faces in the months and quarters ahead will be weaning customers off these deep discounts,” Saleh said.

Comparable sales in the company’s International Developmental Licensed Markets segment rose 4.1 per cent in the quarter ended December 31, beating estimates of a 0.43 per cent drop. The improvement was led by Middle East and Japan markets.

Sales in international markets rose 0. per cent, saddled by weakness in Britain.

Global same-store sales increased 0.4 per cent in the quarter, a surprise rise compared with analysts’ expectations of a 0.63 per cent decline.

McDonald’s posted a five per cent drop in net income to $2.04 billion ($C2.92 billion) on an adjusted basis, compared to estimates of $2.07 billion (C$2.96 billion)

—Reporting by Savyata Mishra in Bengaluru and Waylon Cunningham in New York

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Syngenta’s Enogen trait produces corn that contains more alpha-amylase enzyme which makes the breakdown of starch to sugars more efficient. Enogen corn feed is about five per cent more feed efficient than corn without the trait.

Reducing the need for feed means fewer methane emissions, which is attractive to companies like McDonald’s which aim to show they’re reducing carbon emissions in their supply chain.

The program will start first in the United States, but Dan Wright, who leads the Enogen business in North America and seeds in Canada for Syngenta, says bringing the program called Feed Forward to Canada is a priority.

“There’s a lot of beef and dairy in Canada and expanding the Feed Forward program into Canada is something we’re really active on to make happen,” he says.

Farmers will receive a direct payment from Syngenta for four cents per head per day for each animal on the feed. In return for the payment, McDonald’s owns the carbon intensity offset asset.

Producers also have to commit to feeding Enogen corn at 50 per cent of the starch in the cattle’s ration on a dry matter basis in a Total Mixed Ration. The corn can be in any form it’s usually fed on a farm, including silage, high moisture corn or grain corn. Enogen is approved for food and feed use in Canad and the United States, but it is kept from the food stream as the composition is different than most corn. It’s also used in ethanol.

There are numbers of days on feed required to qualify including:

• Backgrounding – 70 to 120 days
• Finishers – 120 to 225 days
• Dairy beef – 180 days

As a result, a dairy beef animal fed for 180 days would qualify for a $7.20 payment, while an animal backgrounded for 120 days would receive $4.80.

To qualify for the payment, farmers have to file a feeding report, a closeout report and an invoice that shows the proof of purchase for seed, all managed by a stewardship contract. There’s also a requirement for verification.

Wright says trials have been underway for three years on the project to fine-tune reporting and operational requirements.

“I think we’ve got to a pretty good space,” he says.

The data provided to Syngenta is aggregated and anonymous when it’s sent to McDonald’s and the payment is made directly from Syngenta to the farm. Avoiding more players in the process and keeping it efficient was part of the testing period and a priority, says Wright.

McDonald’s, which also has its U.S. meat processor Lopez Foods in the project as a partner, says that for 1,000 head of beef cattle on feed it expects per year:

• 178 tonnes CO2e in greenhouse gas reduction
• a 69-acre reduction (28 hectares) in land use for growing feed
• a reduction of 22 million litres of water used
• 231,000 kilowatt-hours energy savings

The partnership with McDonald’s runs to 2030, says Wright, and he expects it to grow over years, like the adoption of any new technology. McDonald’s has set a target of offsetting 164,000 tonnes of carbon dioxide equivalent per year.

He says there are discussions ongoing with other consumer packaged goods companies. To start, the payments only cover beef and dairy beef production, but there could be dairy opportunities in the future.

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Syngenta’s Enogen corn, a genetically modified crop, contains an enzyme which quickly converts starch to useable sugars.

This allows the cattle to reach market weight quicker and so reduces the greenhouse gases they produce before they are slaughtered and their meat is made into burgers.

Syngenta said a herd of 1,000 animals using the corn as feed would produce 196 less tons of CO2, the same as removing 35 cars from the road for a year.

— Reporting by John Revill

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Shares of the company were down 2.4 per cent before the bell on Tuesday even as it beat profit estimates.

Global sales fell 1.5 per cent in the third quarter, the biggest decline in four years, compared with analysts’ average estimate of a 0.72 per cent fall, according to data compiled by LSEG.

Last week, McDonald’s temporarily paused serving Quarter Pounders in a fifth of its 14,000 U.S. restaurants in an E. coli outbreak that has killed at least one person. Shares declined nearly seven per cent last week as infections rose to 75 people. Quarter Pounders were being added back to the menu this week.

Slivered onions used in the hamburgers are likely to be the source of the infection, with the Colorado Department of Agriculture over the weekend ruling out beef patties as the possible cause.

Customer visits in the U.S. fell 6.4 per cent, 9.1 per cent and 9.5 per cent year-over-year on October 23, 24 and 25, respectively, according to a Gordon Haskett note. The company’s conference call on earnings is expected to focus on any fallout from the outbreak.

The outbreak likely has thrown a near term “monkey wrench” into the U.S. sales recovery when coupled with mixed third-quarter results, Citi analyst Jon Tower said.

The fast-food chain has been hit by slowing customer visits across the U.S., France, UK, Middle East and China as price-conscious shoppers looked for cheaper meals and cooked more at home.

International markets struggle

Sales in international markets fell 2.1 per cent, driven by weakness in France and Britain, compared with estimates of a 1.21 per cent drop.

Weaker consumer spending in China and impacts of the Middle East conflict have dented McDonald’s business segment where restaurants are operated by local partners, with sales dipping 3.5 per cent compared with a 10.5 per cent rise a year earlier.

“We believe European economies remain under pressure with potential for softer traffic from concerns with war in the Middle East, especially in urban markets, and some pressure on costs from a stronger dollar,” Jim Sanderson, analyst with Northcoast Research.

Western fast-food chains such as McDonald’s and Starbucks have seen boycott campaigns over their perceived pro-Israeli stance and alleged financial ties to Israel.

U.S. comparable sales grew 0.3 per cent, reversing the previous quarter’s drop, aided by promotions.

Overall sluggish demand has prompted fast-food chains including McDonald’s, Wendy’s, Burger King and Taco Bell to lean into meal bundles and limited-time offers in a bid to revive traffic, especially among lower-income customers.

McDonald’s CEO Chris Kempczinski said the company was focused on affordability as customers continue to be mindful about spending.

The Chicago-based company earned $3.23 per share on an adjusted basis, above analysts’ estimates of $3.20.

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“We remain very confident that any contaminated product related to this outbreak has been removed from our supply chain and is out of all McDonald’s restaurants,” the fast-food chain’s Chief Supply Chain Officer Cesar Pina said in a statement.

The Colorado Department of Agriculture said that all subsamples from multiple lots of McDonald’s brand fresh and frozen beef patties had tested negative for E. coli, adding that it had completed beef testing and does not anticipate receiving further samples.

McDonald’s said it would resume distribution of fresh supplies of the Quarter Pounder and that it is expected to be available in all restaurants in the coming week, according to the statement.

Regulators had been investigating whether McDonald’s beef patties could be affected.

The U.S. Food and Drug Administration and the U.S. Department of Agriculture didn’t immediately respond to a Reuters request for comment.

E. coli is killed in beef when cooked properly. The McDonald’s Quarter Pounder is served with raw, slivered onions; affected restaurants will serve the burgers without such onions.

U.S. fast-food chains have pulled fresh onions out of their menu items after the vegetable was named as the likely source of an E. coli outbreak.

McDonald’s has pulled the Quarter Pounder from about one-fifth of its U.S. restaurants, including in Colorado, Kansas, Utah and Wyoming, and in parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma.

Past E. coli outbreaks have hampered sales at big fast-food restaurants as customers avoid affected chains.

— Reporting by Kanjyik Ghosh

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Restaurant Brands International, parent of McDonald’s rival Burger King, and Yum Brands said they were removing fresh onions from menu items. Roughly five per cent of Burger King locations have removed onions from the menu, a Burger King spokesperson said in a statement.

McDonald’s said on Thursday that Taylor Farms was the supplier of the sliced onions that have been removed. Taylor Farms did not immediately respond to a request for comment. The company has recalled several batches of yellow onions produced in a Colorado facility, according to a recall memo on Wednesday by US Foods, one of the largest U.S. suppliers of food service operations.

About five per cent of Burger King stores also get supplies from Taylor Farms, but a company spokesperson said Burger King has not been contacted yet from health authorities or had any illnesses. Yum, which operates KFC, Pizza Hut and the Taco Bell chains, said it was removing onions “out of an abundance of caution.”

The U.S. Department of Agriculture said late on Wednesday that fresh onions were the likely source of the outbreak. The U.S. Food and Drug Administration said it is looking at all possible sources of the outbreak and has not determined the cause.

Past E. coli outbreaks have hampered sales at big fast-food restaurants as customers avoid the affected chains for fear of illness. Regulators are still investigating whether McDonald’s beef patties could be affected, but E. coli is killed in beef when cooked properly, whereas the McDonald’s Quarter Pounder is served with raw, slivered onions.

McDonald’s has pulled the Quarter Pounder from about one-fifth of its U.S. restaurants, including in Colorado, Kansas, Utah and Wyoming, and in parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma.

“We’ve been told by corporate to not use any onions going forward for the foreseeable future,” Maria Gonzales, the on-duty manager inside a Burger King in Longmont, Colorado, said on Wednesday. “They’re off our menu.”

McDonald’s did not immediately respond to a request for comment on Thursday.

McDonald’s has moved quickly to try to contain the damage while also trying to reassure customers of its efforts. That may be critical – previous outbreaks in 2015 at Chipotle Mexican Grill CMG.N and in 1993 at Jack in the Box caused sales at those companies to drop sharply for several quarters.

David Tarantino, an analyst at Baird Equity Research, downgraded McDonald’s shares to “neutral” late on Wednesday. “We are concerned that reports of an E. coli outbreak linked to McDonald’s restaurants in multiple U.S. states could pose a major threat to consumer sentiment” and thus hurt U.S. comparable-store sales, he said.

Plenty of customers

In the immediate aftermath of the McDonald’s outbreak, plenty of people in Colorado were still eating at the U.S. giant, according to checks by Reuters. Some were avoiding the hamburgers.

Charity Atkinson was munching on a 20-piece box of Chicken McNuggets in a McDonald’s parking lot in Longmont on Wednesday afternoon, about 30 miles (48 km) north of Denver.

Atkinson said she was not worried about the outbreak, but she did note that for now she was avoiding the burgers.

“I’m hoping everything gets taken care of really soon, because my mom loves the Quarter Pounders with cheese,” Atkinson said. “Hopefully they’ll have better sanitary protections soon.”

At Burger King, Monica and Jesus Martinez were digging in to a bag of burgers and fries while sitting inside their car, and said they had decided to frequent Burger King in large part because of the outbreak at McDonald’s.

“I’m worried! I like the Quarter Pounder but I’m really worried,” Monica Martinez said. “It will definitely influence my choices of where we eat going forward.”

The outbreak of E. coli was first reported to the U.S. Centers for Disease Control and Prevention in late September.

The USDA on Wednesday said that one of its state partners was also testing samples of beef for E. coli.

—Additional reporting by Siddharth Cavale in New York and Aishwarya Venugopal in Bengaluru

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The outbreak has sickened people across the U.S. West and Midwest, with 10 hospitalized due to serious complications, according to the U.S. Centers for Disease Control and Prevention (CDC), which is investigating the outbreak. A McDonald’s spokesperson said the outbreak is limited to the United States.

“We fully expect to see more cases,” said CDC spokesman Tom Skinner. “McDonald’s has moved rather quickly to take action to, hopefully, prevent as many cases as possible.”

Previous E. coli outbreaks at big U.S. fast-food chains have caused consumers to shun those chains for months. McDonald’s USA President Joe Erlinger on Wednesday said the fast-food chain needs to rebuild trust with the public after it pulled the item off its menu at a fifth of its 14,000 U.S. restaurants.

The company pulled the Quarter Pounder from its menu at McDonald’s locations in Colorado, Kansas, Utah and Wyoming, and in parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma.

The CDC and McDonald’s are scrutinizing the Chicago-based company’s supplies of slivered onions and beef patties as they try to determine the cause of the outbreak, the company said.

The U.S. Department of Agriculture said late on Wednesday that the onions used were the likely source of the illness, though one of its state partners is testing samples of the beef for E. coli.

The company’s stock closed down 5.1 per cent at $298.57 on Wednesday. Shares hit an intraday low of $290.88.

‘Very serious disease’

The E. coli O157:H7 strain that led to the McDonald’s outbreak is the same as a strain linked to a 1993 incident at Jack in the Box that killed four children. It can cause “very serious disease,” especially for the elderly, children and people who are immunocompromised, said Shari Shea, director of food safety at the Association of Public Health Laboratories.

McDonald’s suppliers test their products frequently and did so in the date range the CDC gave for the outbreak, and none of them identified this E. coli strain, company spokespeople said.

U.S. food safety attorney Bill Marler, who represented a victim in the Jack in the Box outbreak, said this is a relatively large and serious outbreak for which McDonald’s will face “a lot” of liability for the contamination.

“We’re still in the early stages of how McDonald’s is going to handle this,” he said. “But getting the supplier of the onions out – if they’re confident that’s the source of it – is going to be really important.”

Marler said that in the 1990s, he dealt almost exclusively with lawsuits involving contaminated beef, but in recent years E. coli outbreaks have been almost solely limited to produce contaminated through irrigation or flooding with feces from nearby cattle. E. coli is a natural pathogen in the guts of cows.

Jim Lewis, who was a franchisee in New York City for more than 30 years before exiting the system in 2019, said when E. coli became a major concern decades ago, McDonald’s was adamant about its protections for its beef supply chain.

“They were over the top to make sure it would never happen,” he said.

He said McDonald’s has historically been the “safest, strongest food chain in the world. So this is devastating to us internally.”

Analysts flagged the outbreak as a potential black eye for McDonald’s ahead of earnings.

“The worst-case scenario is if more people get sick or multiple ingredients or suppliers are impacted, which could be a longer-lasting issue that could also tarnish the brand,” CFRA Research analyst Arun Sundaram said.

During an appearance on NBC’s “Today” show on Wednesday, McDonald’s USA chief Erlinger pointed to the company’s steps to quickly pull the Quarter Pounder from its menu in areas where the outbreak occurred.

“Given the recent events of the past 24 hours, our priority is to reinforce the confidence of American consumers,” he said.

In the past, two notable E. coli outbreaks – at Chipotle Mexican Grill in 2015 and Jack in the Box in 1993 – significantly hurt sales at those chains.

Chipotle took a year-and-a-half to stabilize, while Jack in the Box sales declined for four straight quarters, Raymond James analyst Brian Vaccaro said.

Chipotle shares fell nearly 50 per cent during the 2015-2018 period when cases of norovirus infections were reported after the E. coli outbreak.

Analysts said McDonald’s fourth-quarter sales could experience some pressure from the outbreak, but it was too early to say whether it would be worse than the previous two E. coli cases.

— Additional reporting by Aishwarya Venugopal in Bengaluru and Julie Steenhuysen and Tom Polansek in Chicago

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McDonald’s said in a lawsuit filed on Friday in Brooklyn federal court that the meatpackers, also including Cargill and National Beef Packing, collectively reduced their output to drive up industry prices since 2015.

The lawsuit is the latest to accuse the world’s largest meatpackers of violating U.S. antitrust law by coordinating on the price they paid for cattle and on slaughter volumes.

“Only colluding meatpackers would expect to benefit by reducing their prices and purchases of slaughtered cattle because they would know that their conspiracy would shield them from the dynamics of a competitive marketplace,” McDonald’s said in its lawsuit.

JBS, Tyson, Cargill and National Beef did not immediately respond to requests for comment on the lawsuit on Monday. McDonald’s had no immediate comment.

The meat producers have denied any wrongdoing in related cases that have been consolidated in Minnesota federal court. The plaintiffs in those cases include BJ’s Wholesale, Sodexo, Target and Aldi.

The beef meatpackers also face lawsuits from U.S. consumers, cattle producers and others that are seeking class-action status and monetary damages in the Minnesota litigation.

Cattle producers who said they sold animals directly to the meatpackers for slaughter said they lost billions in the alleged scheme, court records show.

McDonald’s has 13,000 branded restaurants in the United States, part of its 39,000 restaurant global footprint in more than 100 countries.

McDonald’s said it was seeking unspecified monetary damages and a court to order an end to the alleged price-fixing conspiracy.

U.S. District John Tunheim in Minneapolis is overseeing the coordinated beef antitrust legal proceedings.

In the first settlement, JBS said in 2022 it would pay $52.5 million to resolve some of the purchasers’ class action claims.

The case is McDonald’s Corp v. Cargill et al, U.S. District Court, Eastern District of New York, No. 1:24-cv-07017-TAM.

For McDonald’s: Philip Iovieno Nicholas and Gravante Jr of Cadwalader, Wickersham & Taft
For defendants: No appearances yet

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The fast-food company is closing its offices “out of respect,” and to “provide dignity, confidentiality, and comfort to our colleagues,” said the source, who was not authorized to speak to the media.

“It used to be that folks would be called into a conference room with the windows papered over and then have to walk back to their desk to collect their personal belongings and leave with their head down,” the source said.

McDonald’s will have more employees going into new roles this week or receiving promotions then being laid off, the source added. The chain has more than 150,000 employees globally, with about 70 per cent based outside of the U.S., including in company-owned restaurants.

The layoffs do not include the more than two million worker in franchised McDonald’s restaurants around the world.

Chicago-based McDonald’s did not immediately return a request for comment.

McDonald’s said in January that it would review corporate staffing levels as part of an updated business strategy, which could lead to layoffs in some areas and expansion in others.

As part of updating its strategy, McDonald’s also plans to build new restaurants. It has hiked prices on its menu over the last year as commodity and labour costs have soared.

— Reporting for Reuters by Jessica DiNapoli and Hilary Russ in New York.

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