McDonald’s Corp. (MCD) has issued a recall of 13.4 million “Shrek” promotional drinking glasses in the United States and Canada after the US Consumer Product Safety Commission (CPSC) discovered the presence of the toxic metal cadmium in it at a higher than tolerant level.
According to CPSC and Health Ministry of Canada, the level of cadmium present in the “Shrek Forever After” glasses is slightly above the new stricter permissive level which, the agency is in the process of setting. Although there have been no reports of illness to date, the quick action was taken by CPSC considering the three recalls of children’s jewelry containing cadmium that already took place this year including the recall of 55,000 necklaces sold at Wal-Mart Stores (WMT) in January 29, 2010.
The 16oz glasses were made by ARC International in Millville, New Jersey, to promote the recently released animated film “Shrek Forever After” at $2 each prior to their withdrawal by McDonald’s. Cadmium was found in the painted design of the movie characters on the glasses.
Cadmium is an extremely toxic metal used in producing paint and coatings, batteries and other products. Its long-term usage can cause adverse health effects like softening of bones and severe kidney problems.
Consumers have been advised to immediately stop using the “Shrek” glasses and McDonald’s will post information on its website regarding refunds.
According to McDonald’s, the glassware was evaluated by an independent third-party lab that is accredited by the CPSC, and the products were in compliance with state and federal law. However, McDonald’s remains fully co-operative with CPSC and addressed this step as a precautionary measure.
McDonald’s stock did not appear to be negatively impacted in a big way on this news and was down 0.2% at $66.70 last Friday. In fact, we believe this move is going to ensure the company’s customer support initiatives and will take its already established goodwill one step ahead.
McDonald’s last recall with the CPSC, involving 100,000 Chicago Bears bobble-head figurines with paint containing excess levels of lead, occurred back in 2002.
McDonald’s is the market leader in fast food outlets, with more than 32,400 restaurants in more than 100 countries worldwide. About 80% of McDonald’s outlets are run by franchisees or affiliates.
We currently have a short-term Hold recommendation on McDonald’s.
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