KFC, Burger King And Domino's India Stocks Under Pressure Amid McDonald's Fake Cheese Fallout

Shares of fast-food restaurant chain operators were tumbling on Tuesday after state authorities were reportedly set to launch inspections into food-quality standards following an incident where fake cheese was found to be used at a McDonald’s.

What Happened: Maharashtra is set to conduct inspections at outlets of various global fast-food chains to verify the use of cheese alternatives in products wrongly advertised as containing authentic cheese, Reuters reported, citing a senior official.

This initiative extends beyond the recent scrutiny focused on McDonald’s, posing potential challenges for multinational brands amid recent inflationary pressures impacting the consumption of higher-priced burgers and pizzas in India.

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Westlife Foodworld, the largest franchisee of McDonald’s in India, has faced scrutiny over its use of “real cheese” following media reports revealing the use of cheese analogues made from vegetable oil instead of authentic cheese in some products. While the franchisee disputed these findings, it took steps in December to rename several burgers and nuggets, removing the term “cheese” from their names.

The state’s authorities will reportedly now inspect all McDonald’s outlets, along with those of other prominent fast-food chains, to ensure compliance with display and labelling regulations. Although specific brands targeted for inspection were not disclosed, outlets of popular chains like Domino’s, Pizza Hut, Burger King and KFC are likely to face scrutiny.

Authorities in Maharashtra have the authority to suspend the licenses of restaurants found violating food and safety regulations that mislead consumers. Westlife, which operates McDonald’s in West and South India, has said it is willing to cooperate with the inspection.

Price Action: Shares of franchise Domino’s operator Jubilant FoodWorks were down 0.9%; Burger King operator Restaurant Brands Asia’s stock was up 0.87% easing from gains during the session; and Pizza Hut and KFC operator Devyani International was down 3.94%.

Westlife Foodworld’s share price was down 2.78% at ₹779.30 in late afternoon trade on Tuesday.

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