Well that escalated quickly. US-Russo animosity over the annexation of the Crimea have reached new highs - and new burgers. Specifically McDonald’s. Make no mistake about it, this is purely political; McDonald’s has been making its menu healthier ever since it’s inception in the then Soviet Union. It’s never been targeted until now. Add to the fact that Russia is suing the fast food chain for selling food with “too many calories” and you can see that it’s a political move. After all, this isn’t the first time Russia has done this. Back in 2008, when tensions were rising between Georgia (the country) and itself, it banned the importation of Georgian wine for failing to meet sanitary requirements. However, a lawsuit of this magnitude will affect the US not only politically, but financially as well - probably something else Russia is counting on to lend strength to negotiations on trade policy. Yet McDonald’s is set to take the fall for this.
The US market for McDonalds has long since saturated. The main way this stalwart is to make any futher gains in market cap is thru international expansion. In its most recent SEC filing on global sales on June 9th, the company has admitted to slowing growth in the US, actually losing 1% in sales on home soil. Inversely, its European chains were up 0.4%, and the Asia/Pacific, Middle East and Africa (APMEA) gained in sales by 1% as well. However, it is because of this growth that decreased sales in Russia would be a big problem. Given that Mcdonalds is already a stalwart, it doesn’t exactly have much room for huge jumps as opposed to smaller companies. As such, it primarily will attract investors who need a safe stock to pay them dividends. Losing sales would kill off McDonald’s aura of invincibility by quite a bit, making it much less attractive to investors. After all, dropping sales in two of your three key markets is never good for any company in the long run, even one as storied as Mcdonalds. Just ask GM.
Unfortunately, some damage will already have been done just from this lawsuit. Government propaganda is a powerful thing. Just think about the NSA: the US government managed to persuade the entire world that it never stooped down to the invasive types of surveillance that other countries utilized. Now, it’s being proclaimed hypocritical, even by some of its own allies. Regardless, the entire NSA PRISM debacle just served to underscore how well a government can manipulate its own people. There will undoubtedly be those in Russia who swear off of McDonalds because the government tells them its too unhealthy. In fact, the lawsuit isn’t even the main battleground; It’s going to be a PR damage control spectacular as the golden arches attempts to soothe customers finding out facts about their food that they’d rather not. Facts that will probably be the result of “recent government studies”, or “news”.
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It’s not all doom and gloom. This may just be a scare tactic by Russia to try and get the US government to blink. After all, Investors won’t suddenly dump stock unless this lawsuit has a proven effect such as closing down Mcdonalds stores in Russia, or leveraging higher taxes on them. Even then, there will be those who don’t pay much attention to a stock’s specific news, leaving MCD time to recuperate until next quarter’s earnings report.
Ultimately, this unprecedented lawsuit is analogous at best, and downright impossible to predict at worst. So if you own MCD, I pray for you/them/their lawyers. If not, perhaps you could jump in and scoop it up at a bargain price.
