Photo by Polina Tankilevitch
The days of ultra-cheap prices at McDonald’s have long passed, and now the company’s CEO, Chris Kempczinski, addressed concerns surrounding the major price increase at the fast-food chain in a recent earnings call. Big Mac meals, for one, cost up to $ 18. The move to raise prices to bolster sales has led to a decline in consumer patronage.
Kempczinski acknowledged that the company’s sales fell short of expectations in the last quarter, marking the first occurrence in nearly four years. He attributed part of this shortfall to the higher menu prices implemented by McDonald’s.
With a global same-store sales growth of only 3.4 percent in the fourth quarter, which fell short of estimates, McDonald’s faces the challenge of winning back customers whose steep price increases have deterred. This starkly contrasts the 8.8 percent same-store sales growth experienced in the previous quarter before the price hikes, Fortune reported. On top of this, the chain has to deal with demands for higher wages.
“I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability,” Kempczinski told analysts.
“Eating at home has become more affordable,” Kempczinski added. “The battleground is certainly with that low-income consumer.”
One demographic significantly affected by the price hikes is low-income customers, particularly those earning less than $45,000 per year. Kempczinski noted that many of these customers have opted to forego McDonald’s in favor of more affordable options, such as home-cooked meals, as inflation eases and grocery costs decrease, according to Nation’s Restaurant News.
“The battleground is with the low-income consumer. What you’re going to see is more attention to affordability. Think about that as an absolute price point, which is more important for that consumer to get them into the restaurants than maybe value messaging,” Kempczinski said. “We are set up well to go after that; we have our Dollar 1, 2, 3 platform. There will be some activity at the local level to make sure we continue to provide value for the lower income consumer.”
Despite the challenges posed by the current economic climate, including inflation and the ongoing conflict in the Middle East, McDonald’s remains optimistic about its future prospects. The company is investing heavily in technology platforms, digital capabilities, and development initiatives, with plans to expand its global presence to 50,000 restaurants by 2027.
Photo by Polina Tankilevitch: https://www.pexels.com/photo/fast-food-on-white-background-4109257/
