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McDonald's Beef Sales Fall in Midst of New Mad Cow Crisis in EU
Headline: McDonald's Faces Crisis Over Contaminated Beef ...

Wire Service: OTC (COMTEX Newswire)
Date: Wed, Nov 22, 2000

Nov. 19 (Sunday Business/KRTBN)--McDonald's famous golden arches have
become a beacon for burger addicts around the world, but now the company
faces a consumer backlash as fears about contaminated beef spread
throughout Europe.
Growing panic that French beef could be infected with BSE has caused
sales to slump in France and in Italy, where a significant proportion of
the consumer giant's burgers are supplied by Gallic farmers.
In France, McDonald's has confirmed that overall turnover has fallen by
around 10 percent since it emerged that domestic meat could be infected
with mad cow disease, although beefburger sales are thought to have fallen
by as much as 40 percent .
The company's Italian headquarters refused to admit that trade had been
hit, but judging by the absence of queues at McDonald's outlets in central
Milan -- where lunchtime customers were served almost immediately instead
of having to wait a more typical 10 minutes -- the crisis is starting to
bite.
In Germany, where the government is weighing whether to join Italy in
banning French beef, the company's spokeswoman says the scare has prompted
McDonald's to "watch the market", although she declined to provide any
information on sales for the year.
In fact, throughout Europe the company is reluctant to reveal the full
extent of BSE's impact: the national offices in Belgium, Italy, Germany,
Spain and Russia all refused to disclose their latest domestic sales
figures.
The company will, however, confirm that some consumers are switching
away from beefburgers. "We are noticing a shift in demand from beef to
chicken, particularly in Happy Meals," admits Alessandra di Montezemolo,
McDonald's European head of communications. "Many schools don't serve beef
any more so children eat less of it and have less of a taste for it. We
don't know how this situation is going to evolve."
Stockwatchers believe that long-term concerns over the safety of beef
could force the company to reassess both trends in demand and sources of
supply. Like GM food, whether McDonald's is safe to eat could well become
less relevant than whether consumers are prepared to accept what large
corporations would have them believe.
"It's certainly an issue and it's something the company has to face, but
ultimately McDonald's can get through it," says Patrick Schumann, a US
analyst at Edward Jones. Shares in the company, which is listed on the New
York Stock Exchange, were less affected by the crisis than European sales,
remaining steady at around UKpound 33 throughout the week.
However, four years ago, when former health secretary Stephen Dorrell
told the House of Commons that the human form of mad cow disease may have
been caused by eating infected meat in the 1980s, and that all cattle over
30 months old would be slaughtered, the British backlash against McDonald's
beef products was immediate and powerful.
In the five days after the announcement, total UK sales fell by 15
percent and the company was forced to withdraw 60 percent of its range
until alternative suppliers could be found. Demand recovered five days
later when stores were restocked with beef from other countries.
At that time, McDonald's UK acquired 50 percent of its beef from British
farms and the remainder from other European countries including Germany,
France and Holland. McDonald's policy is to use domestic meat supplies
wherever possible, but today around 70 percent of its beef comes from the
UK and the remainder from Ireland.
In France and Italy last week, the company's reaction to the crisis had
been to insist that its products are safe to eat, even though the Italian
government has banned imports of French meat and foreign animal feed and
taken red meat off school menus.
McDonald's, which added 1,773 restaurants to its total of more than 28,
000 around the world in the first nine months of the year, uses no
mechanically-recovered meat and carefully monitors its supply chain. The
meat contains no offal and comes from the front quarters of milk cows or
young bovines, neither of which eat feed containing animal protein.
Meanwhile, consumers throughout France are breaking ingrained habits and
avoiding red meat, while in Italy concern verging on hysteria has spread
quickly among Italian shoppers. Vincenzo Cremonini, chief executive of
Inalca, which supplies McDonald's in Italy, Greece and Cyprus, confirms
that meat sales at Italian supermarkets plunged by between 40 percent and
50 percent last week while those at independent butchers were down by 30
percent . Catering and restaurant outlets, the category which includes
McDonald's, saw less significant falls of between 10 percent and 15 percent
.
In Germany, the beef panic has so far been contained, but in that
country McDonald's is facing other food safety issues. Following Greenpeace
protests over the use of GM chicken feed, the company has agreed to
eliminate from the menu all poultry that has consumed such material by
April.
According to the company's HQ in Illinois, the German group has played a
large role in flat European revenues and increased pressure on margins in
the first half of the year.
On 2 November, Russia introduced a ban on beef imports from seven
regions of France and here, too, sales are thought to be in decline,
although economic rather than health issues are probably responsible.
McDonald's outlet in Pushkin Square, the world's largest branch,
attracted queues longer than those outside Lenin's mausoleum when it opened
in 1990. Ten years ago the unit served approximately twice as many
customers per day as the 15,000-20,000 it attracts today.
As the crisis in Europe continues, McDonald's is sticking to its guns
and refusing to change suppliers. Its only nod to public concern has been a
two-week corporate advertising campaign in France, adapted to address the
quality issue and ending with the line: "The only ingredients we add are
salt and pepper."
Additional reporting: Valeria Korchagina, Eric Culp, Pierre Tran and
Robert Galbraith
By Catherine Wheatley
-0-

To see more of Sunday Business, or to subscribe to the newspaper, go
to http://www.sundaybusiness.co.uk
UKpound preceding a numeral refers to the United Kingdom's pound
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