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Stores close as lean spell takes bite out of mcdonald's value


November 10, 2002 Independent on Sunday (London) by Andrew Johnson, 
Leo Lewis And Paul Kelbie

McDonald's has announced it is to shut 175 stores in 10 countries and will pull out of three countries altogether - reversing its 20-year policy of global expansion. Six hundred jobs are also to go.

Friday's announcement from the corporation's world HQ in Chicago followed a disastrous year in which a plunging share price knocked a third off the corporation's value. Shares worth pounds 31 each two years ago are now worth only pounds 10 and the company's value has fallen from pounds 21bn to pounds 14bn. McDonald's has so far refused to name the 10 countries where restaurants will close, but says the countries it is pulling out of are in Latin America and the Middle East.

Financial experts say in Europe health fears over mad cow disease, and the rise in obesity in children, may have contributed to poor sales. High street competition from healthier alternatives is also to blame.

In the Middle East and Latin America antipathy towards the United States may be keeping people away.

In America itself a price war with McDonald's arch-rival, Burger King, triggered by falling hamburger sales, has knocked profits as well as creating financial problems for Burger King.

McDonald's has long been in the sights of anti-globalisation protesters. On Thursday a partially built-store in Grenoble, France, was burned down.

But with 30,000 restaurants in 121 countries, 400,000 employees and a pounds 21bn turnover this year, McDonald's is still a global player, financial experts say.

On Friday McDonald's chief executive, Jack Greenberg, said he was still looking to boost sales. "We remain focused on growing our existing restaurants' sales and are committed to making the changes necessary to succeed," he said.

The question, experts say, is whether the company that revolutionised eating and business habits across the world is really on its way out or is just experiencing a temporary blip.

"The billion dollar question is whether this is the beginning of the end or merely an adjustment to over-expansion," one Wall Street analyst said.

At McDonald's in Dumbarton outside Glasgow yesterday the lunchtime's "rush" filled less than half of the restaurant. In a country with a preference for a fast-food diet, the golden arches seem less attractive than they used to.

"I come here a couple of times a week with the kids but feel guilty about it every time," said Tracy Watson, 34, from Dumbarton.

"It's easy and convenient but not exactly nutritious. If it wasn't for the children I wouldn't come here at all - the food isn't that good, it's usually cold and fairly bland."

"They have good toys with the happy meal, that's the best bit," interrupted her son Matthew, aged 7.

For electrician Bill Duncan, 48, and his wife Ann, from nearby Balloch, the restaurant provides a convenient coffee break from the weekly shopping chores.

"I can see why they're closing branches; we don't come here very often, just for a coffee and maybe an apple pie on the odd Saturday. It's a quick treat but I certainly wouldn't consider it for a proper meal.

"I remember when McDonald's first arrived in Scotland they were all the rage but ... it's no longer special."

Not everyone is unhappy with McDonald's woes. Dave Morris, one of the "McLibel Two" who was sued by McDonald's in 1997 for claims made against the company in a leaflet, said it has "been under attack from all sides".

"Its workers are organising internationally, local residents are increasingly campaigning against new stores and it is being blamed for causing obesity," he said.

"McDonald's is a barometer of the food industry as a whole and capitalism in general. I think the fact there has been a global campaign against McDonald's for the last 20 years has helped people question their activities and look for alternatives."

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