McDonald's sales slump over food quality fears

McDonald's Japan sees first loss in 11 years, while worldwide sales fall 3.7%

Updated: 
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McDonald's sales have been falling worldwide as a result of food scandals and changing consumer tastes.

News that McDonald's Japan is set for its first loss in 11 years is the latest blow, while it was revealed earlier that global sales had slumped 3.7%.

The company was hit earlier this year by a food safety scandal in Japan, in which it was revealed that one of its chicken suppliers was breaching safety standards. As a result, customers fled. The company, which was previously expecting a net profit of £34.5 million, is now predicting a net loss for the year of £97 million.

"Customers have expressed a lack of confidence in our food quality, and I take responsibility for that," said chief executive Sarah Casanova. "It's our intention to try to turn this business around as fast as we can."

McDonald's had already been suffering in Japan thanks to competition from local convenience stores. But things got much worse for the restaurant chain after a documentary aired showing what was going on in the company's main China-based supplier. Workers were seen handling food with bare, dirty hands and picking up meat from the floor and returning it to the food processing machine.

While the company moved quickly to switch production to Thailand, customers weren't reassured. Sales at McDonalds' 3,000 Japanese outlets were 25% lower in August 2014 than in August 2013 - the biggest drop since the company went public in 2001.

Casanova says she has carried out market research into why Japanese customers are deserting the chain. These included: "McDonald's has gotten expensive"; "I cannot understand the pricing"; and "Restaurants are run down and antiquated".

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And while customers in the rest of the world are still munching their burgers, sales have declined there too. In August, worldwide sales were down by 3.7% - 0.7% in Europe. The company's also suffered from food scares in Russia, where some products were deemed too high in fats and carbohydrates.

A report last month from Euromonitor found that McDonald's is still the UK's favourite fast food outlet, with 16% of the market. In the UK, sales actually rose last year - partly because McDonald's was able to capitalise on the horsemeat scandal that hit rival Burger King.

But, warns Euromonitor, while our squeezed finances have led to us eating more cheap fast food over the last couple of years, this may not continue as disposable incomes fall even more. And, it warns, financial pressures on the outlets themselves mean that many will close next year, especially in rural areas.

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