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McDonald's is about to report earnings. Here's what to expect

suimt — Tue, 29 Oct 2024 04:01:01 +0000

A McDonald’s restaurant in El Sobrante, California, on Oct. 23, 2024.

David Paul Morris | Bloomberg | Getty Images

McDonald’s is expected to report its third-quarter earnings before the bell on Tuesday.

Here’s what Wall Street analysts surveyed by LSEG are expecting the company to report:

Earnings per share: $3.20 expected
Revenue: $6.82 billion

The earnings report comes a week after the Centers for Disease Control and Prevention issued an advisory notice that warned about a deadly E. coli outbreak linked to McDonald’s Quarter Pounder burgers. After temporarily pulling the menu item from roughly a fifth of its U.S. restaurants, the company said Sunday that the burger will return to affected locations, sans slivered onions.

Health authorities have cleared the chain’s fresh beef patties as the source of the outbreak, and the investigation has zeroed in on the slivered onions that are included in the menu item. As of Friday, 75 health cases have been tied to the outbreak, including one death of an older adult.

McDonald’s sales had been lagging even before the outbreak. For the company’s third quarter, analysts are expecting the company to report same-store sales declines of 0.6%, dragged lower by weak international demand, according to StreetAccount estimates.

As inflation-weary consumers dine out less, McDonald’s has been rolling out value menus and combo meals in some of its biggest markets. In the U.S., where it launched a $5 combo meal in late June, its same-store sales are expected to rise 0.5%.

Shares of McDonald’s have fallen 6% since it was first tied to the E. coli outbreak. So far this year, the stock is roughly flat. McDonald’s has a market cap of about $210 billion.

This story is developing. Please check back for updates.

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McDonald's Quarter Pounder burgers to return to restaurants affected by E. coli outbreak

Harsh — Sun, 27 Oct 2024 23:09:50 +0000

A double quarter pounder with cheese and fries arranged at a McDonald’s restaurant in El Sobrante, California, US, on Wednesday, Oct. 23, 2024.

David Paul Morris | Bloomberg | Getty Images

McDonald’s Quarter Pounder burgers will return to roughly 900 restaurants this week after the fast-food giant pulled the menu item linked to a deadly E. coli outbreak.

Affected restaurants — roughly a fifth of the company’s U.S. footprint — will be serving the Quarter Pounder burgers without slivered onions for the foreseeable future as health authorities continue their investigation into the source of the outbreak. That change will affect restaurants in Colorado, Kansas and Wyoming and portions of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, Oklahoma and Utah.

“The issue appears to be contained to a particular ingredient and geography, and we remain very confident that any contaminated product related to this outbreak has been removed from our supply chain and is out of all McDonald’s restaurants,” Cesar Pina, chief supply chain officer for McDonald’s North American operations, said in a letter sent to the company’s U.S. system.

The Colorado Department of Agriculture’s testing did not detect E. coli in samples of the beef patties taken from restaurants in the area, according to Pina. The agency isn’t planning further tests of the company’s beef.

McDonald’s, 1 month

Instead, health authorities have honed in on slivered onions used in the Quarter Pounders as the likely suspect for the outbreak. The Food and Drug Administration is still investigating if onions produced by Taylor Farms are responsible. McDonald’s has stopped using Taylor Farms as a supplier for the ingredient indefinitely.

McDonald’s is now asking its beef suppliers to produce a new supply of the fresh beef patties used in its Quarter Pounders, Pina wrote in a letter sent to the company’s U.S. system. Customers can expect to see the menu item back in all restaurants in the coming week, although it will happen on a rolling basis, depending on delivery and resupply operations.

The Centers for Disease Control and Prevention said Friday that the E. coli outbreak linked to McDonald’s has led to 75 cases across 13 states. Out of 61 patients with information available, 22 have been hospitalized, and two people have developed a serious condition that can cause kidney failure, called hemolytic uremic syndrome. The agency also said previously that an older adult in Colorado died.

Based on reported cases so far, the outbreak took place between Sept. 27 and Oct. 11. Over a two-week period, McDonald’s typically sells roughly one million Quarter Pounders in the affected region, according to company spokespeople.

McDonald’s USA President Joe Erlinger apologized to customers who are feeling “ill, scared or uncertain” in a video posted on the company’s website.

“On behalf of the McDonald’s system, I want you to hear from me: we are sorry,” he said.

McDonald’s is expected to report its third-quarter earnings before the bell on Tuesday. Shares of the company have fallen 7% since the CDC linked the E. coli outbreak to its restaurants.

CDC says 75 people affected in E. coli outbreak linked to McDonald's Quarter Pounders

suimt — Fri, 25 Oct 2024 20:08:54 +0000

A deadly E. coli outbreak linked to McDonald‘s Quarter Pounders has led to 75 cases in 13 states, the Centers for Disease Control and Prevention said Friday, as it investigates the source of the spread.

The outbreak has led to 22 hospitalizations and one previously reported death of an older adult in Colorado.

Out of 61 patients with information available, 22 have been hospitalized and two people have developed a serious condition that can cause kidney failure, called hemolytic uremic syndrome. All of the 42 people who were interviewed by the CDC reported eating at McDonald’s, while 39 people reported eating a beef hamburger, the agency said.

Those with infections ranged between ages 13 and 88, according to the CDC. The agency reiterated that the number of cases in the outbreak is likely much higher than what has been reported so far. The CDC added that the outbreak may not be limited to the states with related cases. That is because many patients do not test for E. coli and recover from an infection without receiving medical care, the CDC said. It also usually takes three to four weeks to determine if a sick person is part of an outbreak.

Shares of the restaurant chain closed down 3% on Friday. The stock has fallen 7% since the CDC announced the outbreak on Tuesday, initially citing 49 cases and one death across 10 states.

McDonald’s declined to comment on the update, citing the company’s statement when the outbreak was first announced.

Quarter Pounder hamburgers are a core menu item for McDonald’s, raking in billions of dollars annually.

Health officials are closely examining the slivered onions used in the Quarter Pounder as a likely contaminant. McDonald’s has instructed restaurants in the affected area to remove slivered onions from their supply, and has paused the distribution of that ingredient in the region.

McDonald’s stores in Colorado, Kansas, Utah, Wyoming as well as parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma have temporarily stopped using Quarter Pounder slivered onions and beef patties, according to the CDC.

McDonald’s identified California-based produce giant Taylor Farms as the supplier for the sliced onions the company removed from its supply chain. Taylor Farms has issued a recall on four raw onion products due to potential E. coli contamination. Burger King, Pizza Hut, KFC and Taco Bell have pulled onions from select restaurants in response to the outbreak.

But federal agencies are also investigating the Quarter Pounder’s beef patty as a potential culprit.

As the CDC and other federal agencies trace cases and work to contain the outbreak, McDonald’s has pulled Quarter Pounders from restaurants in the affected areas. Around a fifth of McDonald’s U.S. restaurants are not selling Quarter Pounder burgers.

McDonald’s spokespeople said Wednesday that it is too early to tell if the outbreak is having any effect on traffic to its restaurants.

The company is expected to report its third-quarter earnings on Tuesday and could share more details with investors about the situation on the conference call.

The outbreak comes after several quarters of sluggish U.S. sales for McDonald’s. Price-sensitive consumers have not been visiting restaurants as much, leading McDonald’s and other fast-food chains to turn to value meals to boost sales. Wall Street analysts are expecting the company to report U.S. same-store sales growth of 0.5% for the third quarter, according to StreetAccount estimates.

For now, McDonald’s is trying to reassure customers that its menu items are safe to eat and drink and that it is taking the outbreak seriously. Experts told CNBC that barring a more serious crisis, the damage to its brand may be minimal, as with an E. coli outbreak linked to Wendy’s two years ago.

What McDonald's needs to do next after E. coli outbreak

Harsh — Fri, 25 Oct 2024 12:00:01 +0000

In this photo illustration, a McDonald’s Quarter Pounder hamburger meal is seen at a McDonald’s on October 23, 2024 in the Flatbush neighborhood in the Brooklyn borough of New York City.

Michael M. Santiago | Getty Images

As McDonald’s and health authorities race to contain a deadly E. coli outbreak, the burger chain faces challenges in the months ahead to keep the trust of diners and investors.

Shares of the fast-food giant have fallen 5% since the Centers for Disease Control and Prevention issued an advisory notice Tuesday, warning that the company’s Quarter Pounder burgers have been linked to an E. coli outbreak in 10 states that has led to one death.

Health investigators have zeroed in on the slivered onions used in the Quarter Pounder as the likely contaminant. McDonald’s confirmed that California-based vegetable producer Taylor Farms is the supplier of onions it removed from its supply chain. Taylor Farms issued a recall on four raw onion products, citing potential E. coli contamination, restaurant supplier U.S. Foods said in a notice to customers Thursday. (U.S. Foods is not a supplier for McDonald’s.)

The CDC reported 49 people became ill from the outbreak from Sept. 27 to Oct. 11, as of Tuesday. Health experts say the number of cases will likely rise as the investigation progresses.

Just two days after the CDC issued its advisory notice, it’s too soon to tell how the outbreak could affect McDonald’s business, especially if the case count grows. But investors are already worried that it could cause sales to fall at the company, which has been trying to rebound from lagging traffic by offering deals to price-sensitive customers.

Company spokespeople said Wednesday that’s it’s far too early to share if the outbreak was having any effect on its restaurants’ sales. McDonald’s is expected to report its third-quarter results on Oct. 29 before the markets open.

The damage to the business will depend in part on how effectively McDonald’s has already contained the outbreak — and how well it can convince diners it is safe to eat at its restaurants.

O157:H7, can cause a serious complication that can lead to kidney failure. One of the patients in the McDonald’s outbreak suffered from that condition, known as hemolytic uremic syndrome. The federal government essentially bans the sale of any ground beef contaminated with the strain, requiring suppliers to test their products for it.

E. coli can spread through contaminated food or water, or by an individual coming into contact with an infected person, environment or animal.

The CDC and the 10 states impacted have been interviewing each patient case to get detailed information about their exposure to E. coli, such as what they ate and when, according to Craig Hedberg, the co-director of the Minnesota Integrated Food Safety Center of Excellence. Hedberg is also a member of the McDonald’s Food Safety Advisory Council, but said he has not worked with the company on its response to the outbreak.

The CDC and the states have been sharing the information they gather with the Food and Drug Administration to trace onion distribution and identify a specific source of contamination, he said. The information is also shared with the U.S. Department of Agriculture’s Food Safety and Inspection Service, which does the same with ground beef.

The CDC is investigating both the Quarter Pounder’s uncooked slivered onions and its beef patty as the potential culprit for the outbreak.

Hedberg said contamination of raw onions with E. coli is “highly plausible,” noting several salmonella outbreaks have been linked to onions in recent years.

McDonald’s uses a single onion supplier, which washes and slices the vegetable, in the affected area.

Meanwhile, McDonald’s uses multiple beef suppliers in the region, and its burgers are supposed to be cooked to an internal temperature that would kill the bacteria. The size of the outbreak “would imply widespread undercooking by many different individual McDonald’s restaurants” if beef was the culprit, according to Hedberg.

But he said that seems unlikely since most fast-food chains have designed their cooking systems to prevent E. coli contamination of ground beef, which is a widely recognized hazard. Still, investigators will likely examine the cooking practices of multiple locations as part of the investigation, Hedberg noted.

Jaenisch said he hopes the investigation will also examine the preparation process for Quarter Pounders to see if there is any potential for cross contamination between slivered onions and other ingredients.

“When you prepare the burger at McDonald’s, at which point are the slivered onions added? Do they have a bowl of slivered onions, someone puts their hands in it and then touches the tomatoes?” Jaenisch said. “I would look very closely at that point of preparation.”

McDonald’s has already pulled Quarter Pounders from restaurants in the affected areas. Roughly a fifth of McDonald’s U.S. restaurants are not selling Quarter Pounder burgers at this time. The company has also instructed restaurants in the area to remove slivered onions from their supply, and has paused the distribution of that ingredient in the region.

Wendy’s dealt with its own link to an E. coli outbreak two years ago. More than 100 people got sick across six states. Still, the incident didn’t have a long-term effect on the chain’s sales.

“They got past it, and you never really heard about it,” KeyBanc analyst Eric Gonzalez told CNBC. “I think there were some operators in the area that probably saw a mid-to-high single digit, maybe 10% decline for a couple days of a week or so, and then it reverted as the news cycle moved on.”

On the other side of the spectrum is Jack in the Box, which became the poster child for food safety issues decades ago.

An outbreak in 1992 and 1993 linked to the chain resulted in the deaths of four children and infected more than 700 people. Media coverage, coupled with the severity of the outbreak, led to a steep decline in sales that year, fueled three straight years of losses and tarnished Jack in the Box’s reputation for years.

And then there’s Chipotle, a more recent example of a chain that struggled for years to improve its food safety and turn around its image after a string of foodborne illnesses.

“It was sort of a victim of its own inexperience, in a way, where not only were there multiple illnesses — E. coli, salmonella, norovirus — but you didn’t really have the expertise and experience level to manage through the crisis,” Gonzalez said.

After the initial wave of outbreaks in 2015, it took Chipotle several more years and a new CEO to rebuild trust in its burritos and bowls.

While investors fear the outbreak will hit McDonald’s sales, it’s unlikely that the burger giant turns into another Chipotle or Jack in the Box.

“We don’t know where this is going to land, as far as McDonald’s is concerned, but you have to have a little bit of confidence in their ability to contain the outbreak,” Gonzalez said. “It’s a very sophisticated organization with a sophisticated supply chain, and I don’t doubt their capabilities.”

Reassuring customers

McDonald’s has already been taking steps to reassure customers about the safety of its food. Barring a much more serious crisis, it may be able to contain the damage to its brand, experts said.

Shortly after the CDC issued its notice, the company released a statement outlining the steps it’s taken to contain the outbreak, along with a video featuring McDonald’s USA President Joe Erlinger.

The following morning, Erlinger appeared on NBC’s “TODAY,” telling viewers — and potential customers — that its food and drinks were safe to consume.

“Any kind of product safety recall requires some crisis communication and reassurance on the part of the corporation that it takes safety seriously, that it takes consumer health seriously and that it will react appropriately,” said Jo-Ellen Pozner, associate professor at the Santa Clara University Leavey School of Business.

She added that she thinks McDonald’s needs to apologize “very publicly” and aim its messaging at both consumers and its shareholders. However, that transparency means more media coverage, which reminds consumers about the crisis and risks scaring them away from McDonald’s restaurants.

Yang said McDonald’s appears to be “doing what they can do so far” while waiting for more information on the specific source of contamination.

But other experts hope the chain does more to mitigate the potential spread of the outbreak during the investigation.

Dr. Darin Detwiler, professor of food policy and corporate social responsibility at Northeastern University, said he believes locations in other unaffected states should be “doubling up on their sanitation procedures and protocols and do more testing of their ingredients.”

“Don’t wait until the lawyers or inspectors say you have a problem,” Detwiler said.

“Why don’t you make the assumption that there could be something in your state, and check out your product,” he said. “That is being proactive. That is corporate social responsibility.”

Bill Marler, an attorney who specializes in cases involving foodborne illnesses, said McDonald’s should also follow in the footsteps of Jack in the Box, which offered to pay medical bills and lost wages for the victims of its E. coli outbreak.

“They just need to be seen as a good corporate player, and that’s really how they’re going to be able to bounce back pretty quickly,” Marler said.

One potential plaintiff tied to the crisis has already reached out to Marler, who represented hundreds of people who sued Jack in the Box in a class-action lawsuit, leading to a settlement of more than $50 million.

McDonald’s is already facing at least two lawsuits tied to the outbreak.

Both Clarissa DeBock, of Nebraska, and Eric Stelly, a resident of Greeley, Colorado, are suing the company for damages in excess of $50,000 after allegedly testing positive for E. coli after eating at McDonald’s, according to court filings.

“McDonald’s has nowhere to hide. They’re strictly liable for producing food that was contaminated. They may be able to point the finger at the onion supplier or the meat supplier, but ultimately they made the hamburger,” said Marler.

McDonald’s declined to comment on the lawsuits.

While media coverage of related lawsuits could bring more attention to McDonald’s, the suits themselves are unlikely to threaten the chain’s existence, according to Pozner.

“McDonald’s is as ubiquitous as Coke. It’s one of these very taken-for-granted brands, for its value as a brand to be diminished in a significant way, would require a much more serious outcome of the E. coli outbreak,” she said. “The scope of this tragedy is still very contained.”

Slumping sales

The outbreak comes as McDonald’s tries to win back diners who balked at years of price increases. For months, McDonald’s has been locked in a war with its rivals over competing value meals.

The restaurant industry broadly has seen traffic fall as inflation-weary consumers cook more at home and visit eateries less frequently. Fast-food chains, including McDonald’s, Burger King and Wendy’s, have turned to discounts and value meals to win back customers.

McDonald’s U.S. restaurants have been offering a $5 value meal since late June. And earlier this month, the chain launched its Chicken Big Mac nationwide, betting that customers would be willing to pay its higher price point because of the novelty. Those moves seemed to be paying off for McDonald’s before the outbreak.

“This is somewhat of a momentum killer for them,” Gonzalez said, adding that the burger category has plenty of “capable substitutes” for McDonald’s.

Combined, McDonald’s, Burger King and Wendy’s control roughly 70% of the burger quick-service restaurant segment, according to Barclays. McDonald’s alone holds 48.8% market share.

“It’s not a zero-sum game, but the burger category specifically is one of the more concentrated segments,” Gonzalez said. “If McDonald’s loses a point of sales, that’s 3 to 4 points up for grabs for Wendy’s or Burger King to capture.”

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Yum Brands and Burger King pull onions from select restaurants after McDonald's E. coli outbreak

suimt — Thu, 24 Oct 2024 19:56:50 +0000

A sign is posted in front of a Taco Bell restaurant in Richmond, California, on May 1, 2024.

Justin Sullivan | Getty Images

Burger King and Taco Bell owner Yum Brands have pulled onions from select restaurants following an E. coli outbreak tied to McDonald’s.

“As we continue to monitor the recently reported E. coli outbreak, and out of an abundance of caution, we have proactively removed fresh onions from select Taco Bell, Pizza Hut and KFC restaurants,” a Yum Brands spokesperson said in a statement to CNBC. “We will continue following supplier and regulatory guidance to ensure the ongoing safety and quality of our food.”

Yum did not specify how many of its restaurants are included in the measure.

It comes after restaurant supplier U.S. Foods on Wednesday issued a recall notification for four onion products produced by Taylor Farms. It is unclear if Yum removed the onions from select locations in response to the recall.

Restaurant Brands International’s Burger King is removing onions from 5% of its U.S. restaurants after reviewing its supply chain and determining those onions originated at the Taylor Farms Colorado facility at the center of the recall.

The burger chain said it only uses whole, fresh onions. Its employees cut, peel, wash and slice the onions at its restaurants.

“Despite no contact from health authorities and no indications of illness, we proactively asked our 5% of restaurants who received whole onions distributed by this facility to dispose of them immediately two days ago and we are in the process of restocking them from other facilities,” a Burger King spokesperson said in a statement to CNBC.

U.S. Foods does not distribute onions for McDonald’s restaurants, and the company has not publicly named Taylor Farms as a supplier. Taylor Farms has not responded to CNBC’s request for comment.

Health authorities are currently investigating the source of the E. coli outbreak, which has led to one death and 49 confirmed cases across 10 states, including Colorado, Nebraska and Wyoming. The Centers for Disease Control and Prevention has interviewed 18 people, 14 of whom remember eating a Quarter Pounder burger from McDonald’s, as of Tuesday.

In response to the outbreak, McDonald’s has pulled Quarter Pounders from roughly a fifth of its U.S. restaurants. The investigation has honed in on two ingredients in the burgers: the fresh beef patties and slivered onions.

McDonald’s said the affected restaurants all source onions from a single facility, which washes and slices the onions. Its beef patties, on the other hand, come from multiple suppliers in the region. If cooked according to internal standards, the temperature would kill any E. coli in the patty.

— CNBC’s Kate Rogers contributed reporting for this story.

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FDA eyes McDonald's supplier Taylor Farms as source of E. Coli outbreak

Harsh — Thu, 24 Oct 2024 15:40:54 +0000

A McDonald’s Quarter Pounder hamburger is shown in this photograph, in New York’s Times Square, Wednesday, Oct. 23, 2024. An E. coli outbreak has been traced to McDonald’s Quarter Pound hamburgers served with raw slivered onions.

Richard Drew | AP

The Food and Drug Administration said Thursday that it’s investigating whether Taylor Farms, a supplier for McDonald’s, is the possible source of the E. coli outbreak linked to Quarter Pounder hamburgers, which has killed at least one person and sickened nearly 50 others.

In a notice to customers, distributor U.S. Foods said Taylor Farms announced a recall on four raw onion products out of an abundance of caution “due to potential E. coli contamination.” The notice urged customers such as restaurants to stop using and destroy the affected products as soon as possible.

The FDA and the Centers for Disease Control and Prevention have honed in on slivered onions served on the hamburgers as the likely source of contamination.

An FDA spokesperson confirmed Thursday the agency was investigating Taylor Farms, adding, “We’re looking at all possible sources.”

As of Wednesday, 49 people have been sickened with E. coli infections linked to the outbreak. One older adult has died, and 10 others, including a child suffering from hemolytic uremic syndrome, have been hospitalized.

Colorado restaurant chains, including Illegal Pete’s and Taco Bell, also removed onions from their menu following the recall, according to local reports. There are no signs of E. coli illnesses linked to those restaurants.

Until now, it wasn’t clear where the McDonald’s onions were sourced from — neither the restaurant chain nor public health officials had said publicly where the onions were grown or whether they were sent to other restaurants.

A McDonald’s spokesperson said Wednesday that the raw onions were sourced from a single supplier and processed at a single facility. They are sliced and packaged at the facility as raw vegetables in individual bags and then distributed to restaurants.

A spokesperson for Taylor Farms did not immediately respond to a request for comment. According to the company’s website, Taylor Farms is a California-based producer of fresh-cut fruits and vegetables.

The strain of E. coli in the outbreak, called O157:H7, produces a powerful toxin that can damage the lining of the small intestine.

Health officials said Wednesday that they expect the number of cases to grow.

'Swicy' items take over restaurant menus as Gen Z seeks heat

suimt — Tue, 22 Oct 2024 18:46:25 +0000

A general view of atmosphere during ‘Sonic Desert’ presented by Coca-Cola Spiced and Topo Chico in partnership with BPM Music on April 13, 2024 in Thermal, California.

Randy Shropshire | Getty Images

The hottest food and drink trend this year isn’t just spicy — it’s also sweet.

“Swicy,” a portmanteau of sweet and spicy, has taken over restaurant marketing. While the term hasn’t actually appeared on menus, the shorthand has become a popular way to describe the resurgence of foods and drinks marrying sweet and spicy flavors. The Food Institute even dubbed it the “Summer of Swicy” this year.

Nearly 10% of restaurant menus have “sweet and spicy” items, up 1.8% over the last 12 months, according to market research firm Datassential. Over the next four years, its menu penetration is expected to rise 9.6%.

A slew of restaurant chains have embraced the trend, from Shake Shack’s swicy menu to Burger King’s Fiery Strawberry & Sprite to Starbucks’ Spicy Lemonade Refreshers. Common menu items have paired fruity flavors and chili powder, or used sauces like hot honey and gochujang, a red chili paste that’s a popular Korean condiment.

Starbucks Spicy Lemonade Refreshers.

Courtesy: Starbucks

Although the menu items were largely only available for a limited time, culinary experts think that the swicy trend has staying power.

Buzzy, trendy menu items are more important now to restaurants, which are leaning on both discounts and innovation to attract diners and reverse declining sales. In August, traffic to U.S. restaurants fell 3.6%, the industry’s second-worst monthly performance this year since January, according to Black Box Intelligence. Limited-time menu items are particularly attractive to Gen Z customers, a key demographic because they account for roughly a fifth of Americans.

McCormick first called out the reemerging trend in its 2022 flavor forecast report, according to Hadar Cohen Aviram, executive chef for the spice and flavoring company’s U.S. consumer division.

McCormick highlighted “plus sweet,” when sweetness acts as a flavor enhancer rather than being the star of the show. The forecasters were even considering naming the trend “swicy” in their report but went with “plus sweet” because it was broader, she said.

The following year, McCormick, which owns Frank’s RedHot and Cholula, called out “beyond heat,” or using other flavors to bring out more flavor in addition to the spiciness.

“We see lots of different people wanting to add some heat to their plates, but they do want to make sure that there’s something for everyone,” Cohen Aviram said.

Shake Shack’s culinary team was inspired to make Korean-inspired items for a limited-time menu, according to John Karangis, the company’s executive chef and vice president of culinary innovation.

One of the menu items was a Korean fried chicken sandwich, coated in a sweet and spicy gochujang glaze. After it created the limited-time menu, Shake Shack’s marketing team pitted the chicken sandwich against the Korean BBQ burger, with savory and salty flavors. It told customers to pick a side: team swicy or team umami.

The swicy trend also appeals to Gen Z, the cohort born between 1997 and 2012.

“We have a new generation, Generation Z, that’s really excited about complex flavor profiles — but there’s only so many you can taste: sweet, salty, bitter, umami,” Nielsen said.

Here’s one example of the generation’s heat-seeking behavior: over half of Gen Z consumers identify as “hot sauce connoisseurs,” according to a survey conducted by NCSolutions.

And with swicy, achieving the perfect ratio can be tough because it’s so personal, McCormick’s Cohen Aviram said.

Feedback from Shake Shack’s customers reflects that, too.

“Of course, we hear a lot of great feedback from guests, and we also heard other feedback like ‘Hey, you could have punched it up a little bit,'” Karangis said.

Cohen Aviram prefers about 40% sweet, 60% spicy when she’s creating swicy concoctions, like a Frank’s RedHot ice cream bar.

“The thing with sweetness if that it kind of hijacks your palate, so if you use too much of it, you’re just not going to sense the nuance,” she said.

When Burger King released its Fiery menu this summer, it ranked the items on a scale of spiciness. At one – meaning the least spicy – was its Fiery Strawberry & Sprite drink. The swicy menu item was inspired by another trend: “dirty sodas,” the combination of soda, creamers and syrups started in Utah, according to Pat O’Toole, Burger King North America’s chief marketing officer.

The drink marked the first time that Burger King tweaked a classic fountain beverage, but it previously introduced a Frozen Fanta Kickin’ Mango, with a similar swicy flavor profile.

“Guests can easily and accessibly try a ‘swicy’ beverage offering and work their way up the spice scale with other food items, if they so choose,” O’Toole said, adding that the chain saw strong interest across its focus groups for a spicy take on Sprite.

Of course, not all swicy profiles resonate with customers. For example, Coca-Cola in September discontinued its spiced Coke just six months after it hit shelves, after it initially intended it as a permanent offering.

But despite some missteps, the swicy pairing is likely here to stay – at least for a while.

“The flavors will stick around, for sure. I think the name will get tiresome. … It probably still has a couple of years to go,” Nielsen said.

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Starbucks taps former Chipotle executive as global chief brand officer

suimt — Fri, 18 Oct 2024 19:25:54 +0000

Tressie Lieberman, the incoming global chief brand officer at Starbucks.

Courtesy: Starbucks

Starbucks has tapped Chipotle alum Tressie Lieberman as its global chief brand officer, a newly created position and the latest executive change under Brian Niccol after he left Chipotle and took over as CEO of the coffee chain last month.

In Niccol’s first week on the job at Starbucks, he outlined his plan for turning around the chain’s slumping sales in the U.S. For the past three quarters, Starbucks has reported same-store sales declines for its home market as its occasional customers buy fewer macchiatos and Refreshers.

Among four top priorities Niccol described in his plan was improving the company’s branding. He wants to remind customers about the chain’s coffee expertise and its special coffee-shop experience, according to his open letter.

“Starbucks is a brand people love. It’s time to tell our story again and reintroduce Starbucks to the world. Tressie is the perfect person to help us do that. She has a proven track record of building strong brands, developing compelling products, creating great customer experiences, and leading breakthrough marketing,” Niccol said in a statement on Friday.

Niccol created a similar global chief brand officer role at Chipotle when he took over there in 2018.

Lieberman will start at Starbucks on Nov 4. and report to Niccol.

Most recently, she served as chief marketing officer for Yahoo. Prior to that role, she was vice president of digital marketing and off-premise at Chipotle between 2018 and 2023. She also overlapped with Niccol when both executives were at Pizza Hut and Taco Bell, which are owned by Yum Brands.

In addition to Lieberman’s hiring, Starbucks said Friday that Dawn Clark, the company’s executive creative director, and Angele Robinson-Gaylord, who leads store development, will now report to Sara Trilling, Starbucks’ president of North America.

The company is also unifying its global communications and corporate affairs departments into a single team.

Previously, Starbucks announced that Michael Conway, the company’s North America CEO, was retiring. Niccol’s predecessor Laxman Narasimhan had appointed Conway to the role last year. After his departure, the company eliminated the position, instead adding Lieberman’s new role. Trilling also now reports directly to Niccol.

In China, Molly Liu is now the sole CEO, after splitting the position with longtime leader of that unit, Belinda Wong, since last year.

Starbucks’ China business has been struggling, hurt by the country’s sluggish economy and the proliferation of local coffee chains that can undercut its prices. Last quarter, the company’s same-store sales slid 14% in China, its second-largest market.

Before his ouster, Narasimhan had said that Starbucks was in the early stages of exploring strategic partnerships for its China business.

Niccol is expected to share more details on his turnaround plans during the company’s fiscal fourth-quarter earnings call on Oct. 30.

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Procter & Gamble earnings beat estimates, but weak demand in China hurts sales

suimt — Fri, 18 Oct 2024 16:12:57 +0000

Procter & Gamble on Friday reported weaker-than-expected revenue as lower demand in China again weighed on its sales.

The company’s organic sales in Greater China, its second-largest market, fell 15% in the fiscal first quarter. As home prices drop and jobless rates rise in the country, shoppers have pulled back their spending, hurting P&G’s sales for shampoo, diapers and other consumer staples.

While executives maintained their confidence in China long term, demand isn’t expected to recover for at least several more quarters.

“The market continues to be weak and will be weak, we believe, for a number of quarters to come,” CFO Andre Schulten said on a call with the press.

P&G’s outlook for China didn’t take into account the Chinese government’s recently announced plans to boost the country’s economy.

Shares of the company fell roughly 1% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

Earnings per share: $1.93 adjusted vs. $1.90 expected
Revenue: $21.74 billion vs. $21.91 billion expected

P&G’s net sales dropped 1% to $21.74 billion. Organic revenue, which strips out foreign exchange, acquisitions and divestitures, rose 2%, helped by higher prices.

The company reported flat volume for the quarter. The metric excludes pricing, which makes it a more accurate reflection of demand than sales. Like many consumer companies, P&G has seen demand for its products fall after several years of price hikes. Last quarter was the first time in more than two years that its volume increased.

In the U.S., P&G’s volume grew in eight of its 10 categories, and the company isn’t seeing any trade down to private-label products, Schulten said.

But it’s a different story in Greater China, which saw its organic sales worsen compared with the prior quarter. The company called out volume declines in China for both its hair care and oral care segments. Still, Greater China accounts for less than 10% of P&G’s revenue.

“The issues around Asia and execution are pretty minimal compared to some of the other rough spots that the company’s gone through in the past,” said Charles Rinehart, chief investment officer of Johnson Investment Counsel, a longtime shareholder in Procter & Gamble.

P&G’s beauty business, which includes brands like Pantene and Olay, saw volume fall 2% in the quarter. In particular, its skin care segment struggled, with organic sales tumbling more than 20%. P&G blamed the steep decline on lower volume and decreased sales of its pricey SK-II brand, which has struggled ever since pandemic lockdowns. Anti-Japanese sentiment in China has been the latest challenge for the brand; last year, SK-II sales took a hit as Chinese consumers boycotted the brand, fearing that Japan’s release of treated radioactive waste would contaminate the products.

Both P&G’s health care and baby, feminine and family care divisions reported 1% declines in volume for the quarter. But its baby care segment, which includes Pampers diapers, had an even worse quarter, with its organic sales falling by mid-single digits. As the global birth rate continues to drop, P&G has turned to pushing consumers to buy more expensive baby care items, like its Pampers Premium diapers, to grow sales. But that strategy can’t always make up for declining volume.

P&G’s grooming division, which includes Gillette and Venus, reported 4% volume growth. The company credited innovation for its strong performance.

The company’s fabric and home care business saw volume rise 1% in the quarter. The division includes Swiffer, Febreze and Tide products.

P&G reported fiscal first-quarter net income attributable to the company of $3.96 billion, or $1.61 per share, down from $4.52 billion, or $1.83 per share, a year earlier.

Excluding restructuring charges and other items, the company earned $1.93 per share.

P&G reiterated its fiscal 2025 forecast. It anticipates core net earnings per share in a range of $6.91 to $7.05 and revenue growth of 2% to 4%.

Trump or Harris? Here are the 2024 stakes for airlines, banks, EVs, health care and more

suimt — Sun, 13 Oct 2024 13:36:31 +0000

Former President Donald Trump and Vice President Kamala Harris face off in the ABC presidential debate on Sept. 10, 2024.

Getty Images

With the U.S. election less than a month away, the country and its corporations are staring down two drastically different options.

For airlines, banks, electric vehicle makers, health-care companies, media firms, restaurants and tech giants, the outcome of the presidential contest could result in stark differences in the rules they’ll face, the mergers they’ll be allowed to pursue, and the taxes they’ll pay.

During his last time in power, former President Donald Trump slashed the corporate tax rate, imposed tariffs on Chinese goods, and sought to cut regulation and red tape and discourage immigration, ideas he’s expected to push again if he wins a second term.

In contrast, Vice President Kamala Harris has endorsed hiking the tax rate on corporations to 28% from the 21% rate enacted under Trump, a move that would require congressional approval. Most business executives expect Harris to broadly continue President Joe Biden‘s policies, including his war on so-called junk fees across industries.

Personnel is policy, as the saying goes, so the ramifications of the presidential race won’t become clear until the winner begins appointments for as many as a dozen key bodies, including the Treasury, Justice Department, Federal Trade Commission, and Consumer Financial Protection Bureau.

CNBC examined the stakes of the 2024 presidential election for some of corporate America’s biggest sectors. Here’s what a Harris or Trump administration could mean for business:

American Airlines and JetBlue Airways in the Northeast and JetBlue’s now-scuttled plan to buy budget carrier Spirit Airlines.

The previous Trump administration didn’t pursue those types of consumer protections. Industry members say that under Trump, they would expect a more favorable environment for mergers, though four airlines already control more than three-quarters of the U.S. market.

On the aerospace side, Boeing and the hundreds of suppliers that support it are seeking stability more than anything else.

Trump has said on the campaign trail that he supports additional tariffs of 10% or 20% and higher duties on goods from China. That could drive up the cost of producing aircraft and other components for aerospace companies, just as a labor and skills shortage after the pandemic drives up expenses.

Tariffs could also challenge the industry, if they spark retaliatory taxes or trade barriers to China and other countries, which are major buyers of aircraft from Boeing, a top U.S. exporter.

— Leslie Josephs

JPMorgan Chase faced an onslaught of new rules this year as Biden appointees pursued the most significant slate of regulations since the aftermath of the 2008 financial crisis.

Those efforts threaten tens of billions of dollars in industry revenue by slashing fees that banks impose on credit cards and overdrafts and radically revising the capital and risk framework they operate in. The fate of all of those measures is at risk if Trump is elected.

Trump is expected to nominate appointees for key financial regulators, including the CFPB, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation that could result in a weakening or killing off completely of the myriad rules in play.

“The Biden administration’s regulatory agenda across sectors has been very ambitious, especially in finance, and large swaths of it stand to be rolled back by Trump appointees if he wins,” said Tobin Marcus, head of U.S. policy at Wolfe Research.

Bank CEOs and consultants say it would be a relief if aspects of the Biden era — an aggressive CFPB, regulators who discouraged most mergers and elongated times for deal approvals — were dialed back.

“It certainly helps if the president is Republican, and the odds tilt more favorably for the industry if it’s a Republican sweep” in Congress, said the CEO of a bank with nearly $100 billion in assets who declined to be identified speaking about regulators.

Still, some observers point out that Trump 2.0 might not be as friendly to the industry as his first time in office.

Trump’s vice presidential pick, Sen. JD Vance, of Ohio, has often criticized Wall Street banks, and Trump last month began pushing an idea to cap credit card interest rates at 10%, a move that if enacted would have seismic implications for the industry.

Bankers also say that Harris won’t necessarily cater to traditional Democratic Party ideas that have made life tougher for banks. Unless Democrats seize both chambers of Congress as well as the presidency, it may be difficult to get agency heads approved if they’re considered partisan picks, experts note.

“I would not write off the vice president as someone who’s automatically going to go more progressive,” said Lindsey Johnson, head of the Consumer Bankers Association, a trade group for big U.S. retail banks.

— Hugh Son

Inflation Reduction Act.

Harris hasn’t been as vocal a supporter of EVs lately amid slower-than-expected consumer adoption of the vehicles and consumer pushback. She has said she does not support an EV mandate such as the Zero-Emission Vehicles Act of 2019, which she cosponsored during her time as a senator, that would have required automakers to sell only electrified vehicles by 2040. Still, auto industry executives and officials expect a Harris presidency would be largely a continuation, though not a copy, of the past four years of Biden’s EV policy.

They expect some potential leniency on federal fuel economy regulations but minimal changes to the billions of dollars in incentives under the IRA.

— Mike Wayland

more than $4 trillion a year.

Despite spending more on health care than any other wealthy country, the U.S. has the lowest life expectancy at birth, the highest rate of people with multiple chronic diseases and the highest maternal and infant death rates, according to the Commonwealth Fund, an independent research group.

Meanwhile, roughly half of American adults say it is difficult to afford health-care costs, which can drive some into debt or lead them to put off necessary care, according to a May poll conducted by health policy research organization KFF.

Both Harris and Trump have taken aim at the pharmaceutical industry and proposed efforts to lower prescription drug prices in the U.S., which are nearly three times higher than those seen in other countries.

But many of Trump’s efforts to lower costs have been temporary or not immediately effective, health policy experts said. Meanwhile, Harris, if elected, can build on existing efforts of the Biden administration to deliver savings to more patients, they said.

Harris specifically plans to expand certain provisions of the IRA, part of which aims to lower health-care costs for seniors enrolled in Medicare. Harris cast the tie-breaking Senate vote to pass the law in 2022.

Her campaign says she plans to extend two provisions to all Americans, not just seniors: a $2,000 annual cap on out-of-pocket drug spending and a $35 limit on monthly insulin costs.

Harris also intends to accelerate and expand a provision allowing Medicare to directly negotiate drug prices with manufacturers for the first time. Drugmakers fiercely oppose those price talks, with some challenging the effort’s constitutionality in court.

Trump hasn’t publicly indicated what he intends to do about IRA provisions.

Some of Trump’s prior efforts to lower drug prices “didn’t really come into fruition” during his presidency, according to Dr. Mariana Socal, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.

For example, he planned to use executive action to have Medicare pay no more than the lowest price that select other developed countries pay for drugs, a proposal that was blocked by court action and later rescinded.

Trump also led multiple efforts to repeal the Affordable Care Act, including its expansion of Medicaid to low-income adults. In a campaign video in April, Trump said he was not running on terminating the ACA and would rather make it “much, much better and far less money,” though he has provided no specific plans.

He reiterated his belief that the ACA was “lousy health care” during his Sept. 10 debate with Harris. But when asked he did not offer a replacement proposal, saying only that he has “concepts of a plan.”

— Annika Kim Constantino

Paramount Global and Skydance Media is set to move forward, with plans to close in the first half of 2025, many in media have said the Biden administration has broadly chilled deal-making.

“We just need an opportunity for deregulation, so companies can consolidate and do what we need to do even better,” Warner Bros. Discovery CEO David Zaslav said in July at Allen & Co.’s annual Sun Valley conference.

Media mogul John Malone recently told MoffettNathanson analysts that some deals are a nonstarter with this current Justice Department, including mergers between companies in the telecommunications and cable broadband space.

Still, it’s unclear how the regulatory environment could or would change depending on which party is in office. Disney was allowed to acquire Fox Corp.’s assets when Trump was in office, but his administration sued to block AT&T’s merger with Time Warner. Meanwhile, under Biden’s presidency, a federal judge blocked the sale of Simon & Schuster to Penguin Random House, but Amazon’s acquisition of MGM was approved.

“My sense is, regardless of the election outcome, we are likely to remain in a similar tighter regulatory environment when looking at media industry dealmaking,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.

When major media, and even tech, assets change hands, it could also mean increased scrutiny on those in control and whether it creates bias on the platforms.

“Overall, the government and FCC have always been most concerned with having a diversity of voices,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investment.
“But then [Elon Musk’s purchase of Twitter] happened, and it’s clearly showing you can skew a platform to not just what the business needs, but to maybe your personal approach and whims,” he said.

Since Musk acquired the social media platform in 2022, changing its name to X, he has implemented sweeping changes including cutting staff and giving “amnesty” to previously suspended accounts, including Trump’s, which had been suspended following the Jan. 6, 2021, Capitol insurrection. Musk has also faced widespread criticism from civil rights groups for the amplification of bigotry on the platform.

Musk has publicly endorsed Trump, and was recently on the campaign trail with the former president. “As you can see, I’m not just MAGA, I’m Dark MAGA,” Musk said at a recent event. The billionaire has raised funds for Republican causes, and Trump has suggested Musk could eventually play a role in his administration if the Republican candidate were to be reelected.

During his first term, Trump took a particularly hard stance against journalists, and pursued investigations into leaks from his administration to news organizations. Under Biden, the White House has been notably more amenable to journalists.

Also top of mind for media executives — and government officials — is TikTok.

Lawmakers have argued that TikTok’s Chinese ownership could be a national security risk.

Earlier this year, Biden signed legislation that gives Chinese parent ByteDance until January to find a new owner for the platform or face a U.S. ban. TikTok has said the bill, the Protecting Americans From Foreign Adversary Controlled Applications Act, which passed with bipartisan support, violates the First Amendment. The platform has sued the government to stop a potential ban.

While Trump was in office, he attempted to ban TikTok through an executive order, but the effort failed. However, he has more recently switched to supporting the platform, arguing that without it there’s less competition against Meta’s Facebook and other social media.

— Lillian Rizzo and Alex Sherman

Washington Post previously reported.

In keeping with the campaign’s more labor-friendly approach, Harris is also pledging to eliminate the tip credit: In 37 states, employers only have to pay tipped workers the minimum wage as long as that hourly wage and tips add up to the area’s pay floor. Since 1991, the federal pay floor for tipped wages has been stuck at $2.13.

“In the short term, if [restaurants] have to pay higher wages to their waiters, they’re going to have to raise menu prices, which is going to lower demand,” said Michael Lynn, a tipping expert and Cornell University professor.

— Amelia Lucas

has said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.” Last year, the White House issued an executive order that led to the formation of the Commerce Department’s U.S. AI Safety Institute, which is evaluating AI models from OpenAI and Anthropic.

Trump has committed to repealing the executive order.

A second Trump administration might also attempt to challenge a Securities and Exchange Commission rule that requires companies to disclose cybersecurity incidents. The White House said in January that more transparency “will incentivize corporate executives to invest in cybersecurity and cyber risk management.”

Trump’s running mate, Vance, co-sponsored a bill designed to end the rule. Andrew Garbarino, the House Republican who introduced an identical bill, has said the SEC rule increases cybersecurity risk and overlaps with existing law on incident reporting.

Also at stake in the election is the fate of dealmaking for tech investors and executives.

With Lina Khan helming the FTC, the top tech companies have been largely thwarted from making big acquisitions, though the Justice Department and European regulators have also created hurdles.

Tech transaction volume peaked at $1.5 trillion in 2021, then plummeted to $544 billion last year and $465 billion in 2024 as of September, according to Dealogic.

Many in the tech industry are critical of Khan and want her to be replaced should Harris win in November. Meanwhile, Vance, who worked in venture capital before entering politics, said as recently as February — before he was chosen as Trump’s running mate — that Khan was “doing a pretty good job.”

Khan, whom Biden nominated in 2021, has challenged Amazon and Meta on antitrust grounds and has said the FTC will investigate AI investments at Alphabet, Amazon and Microsoft.

— Jordan Novet