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McDonald's China Sales Suffers in August

Sep 10, 2014 07:28 AM EDT | By Jane Galvez
McDonald's, china, fast food chain

McDonald's Corp reported Tuesday that drop in sales across the Asia-Pacific region due to the food-safety scandal in China.

Global same-store sales drop by 3.7%, the lowest since February 2003, as consumers are wary of patronizing the chain in the middle of the scandal. It's comparably bigger than the 2.5 percent drop in July.

The world's biggest hamburger chain experienced a drop of 14.5 in sales in the region and in the Middle East and Africa. Sales in the U.S. dropped for 2.8 percent, while sales in Europe dipped by 0.7 affected by the conflict in Russia.

The scandal started when a TV report in July showed workers at one of McDonald's supplier, Shanghai Husi Food Co., part of the OSI Group Inc., repacking expired meat. The news hurt the sales and the reputation of the fast food chain and extended the effect in countries outside China.

McDonald's has stopped using the supplier and other measures have been implemented to regain the trust of consumers. They pledged to increase the video monitoring of suppliers in-charge of the meat used in their product. They also send more employees to ensure the food-security in the factories.

The company expected a decrease in sales as they have already suffered decline in the Japanese market, but the figures were a shock to the burger chain. McDonald's predicts it will affect the shares for the third quarter by 15 to 20 cents per share compared to its results a year ago.

The hamburger chain isn't the only one affected by the scandal as other restaurants under Yum Brands Inc., stopped supplies from the Shanghai factory. Yum Brands said that they cut all deals with OSI in China, Australia and the U.S. Some chains under the brand are KFC and Pizza Hut.

Aside from the scandal, the fast food chain need to worry about competition as brands like Chipotle are gaining a stronghold in the market.

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