Israel-Gaza boycotts hurt McDonald's sales

McDonald's fell short of a crucial sales target in part because customers were not willing to patronise the chain because they felt it supported Israel.

The fast food company's first quarterly sales deficit in over four years was mainly due to slow growth in its international business division. The boss already acknowledged the impact of the conflict, attributing it to "misinformation." McDonald's shares saw a decrease of around 4% after the release of the news.

McDonald's, Starbucks, and Coca-Cola, along with other Western companies, have encountered boycotts and rallies led by anti-Israeli demonstrators.

According to the firm, the Israel-Gaza conflict substantially impacted performance in many foreign markets in the fourth quarter of 2023.

The sales growth in the Middle East, China, and India divisions had a meagre gain of 0.7% during the fourth quarter of 2023, well below market expectations.

According to CEO Chris Kempczinski's statement on Monday, the operations in Malaysia, Indonesia, and France have had negative impacts, with the most substantial consequences noticed in the Middle East.

"While this war persists, we do not expect any significant improvement in these markets," said the McDonald's CEO.

McDonald's employs a franchise model, in which several independent businesses own and operate most of its 40,000+ stores globally. Roughly 5% of its establishments are located in the Middle East.

The fast-food restaurant received criticism after the announcement by its franchise in Israel that it had provided free lunches to Israeli military troops. The company faced calls for boycotts from those who were deeply angered by Israel's military operations in Gaza as a result of this conduct.

Franchise owners in Muslim-majority countries, such as Kuwait, Malaysia, and Pakistan, were obliged to issue statements to distance themselves from the corporation.

Mr Kempczinski conveyed his dissatisfaction and denounced the criticism as baseless, attributing it to the spread of false information.

McDonald's saw a growth rate of around 4% in worldwide sales during the fourth quarter, a decrease from the 8.8% growth rate in the previous quarter and falling below its average annual growth rate.

The firm saw a positive impact from price inflation, resulting in its most robust sales increase in the United States. Additionally, it achieved sales growth in the UK, Germany, and Canada.

However, the company's US division had lower-than-expected sales growth due to reduced orders from lower-income consumers, who purchased less food and chose more affordable menu items.

Starbucks recently revised its annual sales projection, citing a decline in consumer footfall in the Middle East as one contributing factor.

McDonald's expressed their condolences to the families and communities affected by the turmoil in the area.

The statement emphasised the company's commitment to prioritising its employees' well-being and assisting the surrounding communities where it operates.