) has been in the limelight for the past few days for the wrong
reasons. Earlier it was China and this time it is Russia.
Irrespective of the countries, the impact on the company's
reputation, traffic and revenue is certainly a concern.
Reportedly, the Russian consumer protection agency has filed a
lawsuit against the company in Moscow court stating that the
company is selling food that contains more fat and carbohydrates
than the permissible standards in Russia. Per the agency, some food
items like Caesar wraps and salads had microbial contamination,
which can cause food poisoning. Several other items like
cheeseburger, Filet-o-Fish, and vanilla and chocolate milkshakes
also have calorific values two to three times higher than allowed
by national regulations.
Why the Onslaught?
Some analysts hint that the lawsuit comes in the wake of high
tensions between Moscow and Washington. On Jul 16, 2014, President
Obama imposed some restrictions on Russia that hit the nation's
largest oil producer Rosneft and other energy, financial and
defense firms. These regulations would primarily restrict Russian
giants' access into the U.S markets.
Also, the measures would close medium and long-term dollar
funding for the two largest banks - Gazprombank and Vnesheconombank
- and energy companies - OAO Novatek and Rosneft. In response,
Russian president, Vladimir Putin reportedly stated that the new
sanctions imposed by U.S on Russia would lead to a dead end.
McDonald's International Woes Continue
Besides being plagued by adverse impacts of a sluggish domestic
economy, the company has been suffering as a result of diverse
problems in its international markets.
In 2003, France had boycotted McDonald's in order to protest
against the war in Iraq. In April this year, the company had to
suspend its work at its three Crimean restaurants owing to
heightened tensions between Russia and the West.
Meanwhile, Shanghai Husi Food Co., a supplier of meat for
McDonald's, was found reusing meat that had fallen on the factory
floor as well as mixing fresh and expired meat. This incident
incurred the wrath of food regulators. The company reportedly
apologized and announced a change in meat suppliers.
As a matter of fact, several other food chains like Yum! Brands,
), Burger King Worldwide, Inc. (
) and Papa John's International Inc. (
) had also bought meat from this supplier and have therefore
decided to remove the products from their offerings.
Many other food scandals overseas have hit the meat and dairy
industries in recent years, like the one involving the sale of
chicken injected with excessive levels of antibiotic drugs.
We believe that the latest setback could adversely impact
McDonald's international sales especially at a time when its
comparable sales in the U.S. are suffering due to declining
consumer spending in a sluggishly recovering economy. McDonald's
has a Zacks Rank #4 (Sell).
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