CONSUMER STAPLES: McDonald's (Baa1/BBB+) outbreak of E.coli from burgers

Equities -6% in after-market trade

McDonald's quarter pounders are being linked to a outbreak in E.coli in the US.

• CDC is tracking 49 cases across 10 states with 1 death and 10 hospitalised.
• The unique ingredients to the Quarter Pounder (silvered onions and the beef patties) have been terminated from use in several states.
• McDonald's has responded with the expected - saying safety first, measures being taken etc. https://corporate.mcdonalds.com/corpmcd/our-stories/article/always-putting-food-safety-first.html
• Re financial impact it will likely depend on scale and what triggered the outbreak.
• Most recent example we can find was Chipotle - FDA levelled a $25m fine on it after repeated outbreaks - many driven by violation of company safety policies.
• Above was nothing for Chipotle and a similar amount would not impact MCD ($792m cash on hand at June, north of $7b FCF/yr).

Reputational damage likely to be the bigger mover here. Chipotle had a rough couple of years from 2015 and annual reports are scattered with reaffirming safety and earnings calls on investments to recover brand image.