ENTREPRENEURSHIP / OCT. 25, 2014
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McDonald’s Net Income Plummets 30 Percent Due to Scandals and Competition

McDonalds
Wikimedia

It looks like Mcydees may be struggling to keep profits up.

The McDonald’s food company recently reported a 30 percent drop in quarterly sales—with total revenue decreasing by 4.6 percent to $6.99 billion.

According to profit numbers on September 30, the fast-food company has witnessed its net income fall from $1.52 billion in 2013 to $1.07 billion in 2014.

McDonald’s Corporation has associated this decline to three main factors.

A Food Scandal in Asia

The food scandal occurring in China and Japan is partly to blame, according to the "I’m Lovin’ It" food chain.

A food scare involving tainted meat caused McDonald’s Asia-Pacific, Middle East and Africa division (APMEA) to experience a plunge in profits.

The outrage over the contaminated meat products was first reported in July and was said to be the doing of an American-owned supplier in Shanghai, China.

APMEA has since witnessed a 9.9 percent decline in sales during the third-quarter and a 55 percent decrease overall.

Political Tension in Europe

While Europe’s McDonald’s market beats out the revenue made in the U.S., it too is struggling to stay afloat.

Russia has closed down nine locations for sanitary violations.

However, political tensions in Russia and Ukraine may have fuelled the fire even more.

The U.S. and Europe issued sanctions—restrictions on western finances and oil exploration technology and services—to Russia in response to the Ukraine crisis.

Some believe that this tension has driven Russia to vengefully investigate over 200 McDonald’s restaurants, which has caused Europe’s sells to fall by 1.4 percent in the third quarter.

Tough Competition in the U.S.

Other appealing food restaurants in the United States are causing fierce competition for McDonald’s—especially when it comes to healthy eating. 

For instance, Chipotle Mexican Grill Inc. is claiming their throne in market shares.

As the younger generation gradually pulls away from the fries and hamburgers, they’re gravitating more towards Chipotle’s nutritional menu selection.

[View news report by Reuters]

 

The taco-driven restaurant has always been determined to separate itself from the likes of McDonald’s. 

Instead of being completely secretive about their ingredients, Chipotle has willingly disclosed some of their not so appealing ingredients, such as genetically modified vegetable oil and corn taco shells.

McDonald’s, on the other hand, has persistently been avoiding the conversation concerning its food, which is why people are turning to other alternatives.

The company’s food is notoriously known for many startling accusations.

One in particular is that McDonalds’s hamburger allegedly never rots—which some have suspected to be due to chemical-induced meat.    

Just last week, the restaurant food chain launched a marketing tactic in hopes that it will improve its relevance with critics and reverse its dying sales.

Our food. Your Questions.” is a social media campaign in which customers can inquire about McDonald’s famous menu items and recipes.  

Although McDonald’s has witnessed a small increase in trust and quality perception among the younger crowd, it doesn’t appear that it will help lift plummeting profits.

The corporation expects its profit sales to drop even further throughout October.

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