Inflation is relentlessly high Especially food prices rise. In this environment, customers turn to McDonald’s Even as the burger chain raises its prices.
In the third quarter, McDonald’s prices in the US rose about 10% year-over-year on average. However, the brand is gaining traction among its less affluent clients, CFO Ian Borden noted during a call with an analyst on Thursday.
“We are now gaining ground among lower-income consumers,” he said.
as food Companies raise prices, and find other ways to make consumers feel like they’re getting a good deal. Makers of packaged food and beverages such as PepsiCo
(PEP) And Coca-Cola
(KO) They offer more serving sizes, hoping shoppers will mean it smaller packages Because of lower price tags. Restaurants focus on value, hoping that customers will do so They feel like they get more bang for their buck Even with higher prices.
Borden said McDonald’s “is the leading brand in terms of value for money and affordability.” He noted that some cash-strapped customers are switching from buying meals to buying valuable items.
Some may be trade down To McDonald’s from more expensive chains or restaurants where menu prices rise at a slower rate than prices in grocery stores. For the year ending in September, not adjusted for seasonal fluctuations, grocery prices rose 13%, according to the Bureau of Labor Statistics. In the same period, restaurant prices jumped 8.5%.
“We are satisfied with the… McDonald’s value proposition,” CEO Chris Kempczynski said during the call. “We were allowed to pay some of those prices.”
In the third quarter, sales at McDonald’s
(MCD) US stores are open at least 13 months at 6.1%, thanks in part to higher prices. Shares rose about 3% Thursday after the series’ third-quarter results were released.
Kempczynski said McDonald’s is weighing a number of different potential economic situations, but expects a “mild to moderate recession in the US” as the base case. He noted that “McDonald’s has proven successful in almost any business environment.”
The brand has a history of resilience during periods of economic hardship.
“Our business has done well in that last downturn,” Borden said. added.
But Borden acknowledged that there are differences between the current situation and the situation 14 years ago.
During the financial crisis, McDonald’s had a dollar menu and bolstered the McAfee line. Now, though, the chain is facing higher costs for food, packaging and labor. Consumer behavior has also changed – today’s customers are more interested in delivery.
Even McDonald’s is not immune to the macroeconomic situation. In the third quarter, consolidated revenue fell 5%. The company said that the results were “negatively affected by the translation of foreign currencies,” noting that strong US dollar To explain the rollback. In constant currencies, MacDonald said consolidated revenue was up 2%.
In addition to the higher prices, McDonald’s said the announcement of basic menu items helped boost sales.
Recently, the burger chain has been using promotions such as celebrity meals And the Happy Meals for adults To create a post without adding new menu items that can complicate orders.
Kempzinski said the promotion of Happy Meals for adults has “re-engaged our fans with our staple food, including Big Mac and Chicken McNuggets.”
The company also made a fuss about it Macaribe sandwichand put her back on for a limited time starting October 31 as part of the “Farewell Tour”. But this does not mean that the product will be gone forever.
“The McRib is the goat for sandwiches on our menu,” Kempczynski said Thursday. Like “Michael Jordan and Tom Brady and others, I’m never sure if they’re completely retired or not.”
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”