McDonald's Suffers from Mad Cow Scare in Italy

McDonald's Says Italian Burgers Are Safe, WSJ Reports

Milan, Jan. 16 (Bloomberg) -- McDonald's Corp. is trying to reassure
customers in Italy that its meat is safe after a cow suspected of
suffering from so-called mad-cow disease was found at the company that
makes the No. 1 restaurant chain's patties.

Italy's first case of bovine spongiform encephalopathy, or BSE, was
found in a cow slaughtered by Cremonini, SpA, Health Minister Umberto
Veronesi said last week. McDonald' s meat patties aren't made in the
same factory, the Wall Street Journal first reported, citing a company
spokeswoman.

In December, McDonald's said profit this year will be at the low end of
forecasts because sales dropped in Europe amid the disease scare and a
weak euro. Mad-cow disease has been a concern in Europe and McDonald's
has run advertisements in France and Spain to allay consumer doubts
about its beef safety.

``McDonald's is assertive in promoting its quality procedures,'' said
Salomon Smith Barney analyst Mark Kalinoswki. `` They want to take all
the necessary precautions.''

McDonald's spokeswoman Anna Rozenich referred inquiries to the company's
Italian spokeswoman, who didn't immediately return calls seeking
comment.

Burger King, which uses beef from a unit of Cremonini in its 25
restaurants in Italy, makes sure its beef undergoes stringent testing
from by the company and the Italian government, said Emma Sturt, a
London-based spokeswoman for the chain.

``We think that because they are administering tests that means the meat
is safer,'' Sturt said.

Cremonini produces 80 percent of Italy's hamburger meat.

Shares of McDonald's, based in Oak Brook, Illinois, fell 56 cents to
$33.06 in early afternoon trading.

Effect on Sales

The infected cow was found last week during routine tests after the
animal was slaughtered. At the time, the health minister said there was
no danger to the public.

McDonald's has said it only uses beef from portions of the cow that
scientists and the World Health Organization have said aren't affected
by mad-cow disease.

Sales at restaurants open at least a year in France fell 9.7 percent in
November on concerns about the beef supply, but rose again in December,
said Salomon's Kalinowski. The company highlighted its precautions in 66
newspapers, he said.

Kalinowski expects so-called same-store sales in Italy to dip but then
rise shortly afterwards. Sales in Italy will have less of an effect on
total sales because the company operates 269 restaurants there, compared
with 822 in France, he said.

``Concerns have already arisen in Germany, England and France so I would
expect it to have a minimal effect,'' he said.

Same-store sales are a key indicator of a company's business because
they exclude new and closed locations.

Beyond Italy

McDonald's uses mostly Swedish meat in Sweden and some from Germany
because the domestic supply is limited, said Birgitta Mossburg, a
McDonald's spokeswoman there. She said sales have not been hurt in
Sweden.

The Dutch Agriculture Ministry said today that the first 17,000 cattle
tested so far this year have proven to be BSE-free, Dutch news agency
ANP reported.

A total of nine cases of BSE were discovered in the Netherlands in
November and December of last year. Health and agriculture officials had
declared the country free of the disease a year and a half earlier.

Jan/16/2001 13:40 ET