Tuesday, June 25, 2024
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McDonald’s Set to Increase Deals, Add Value for Customers Amid High Food Costs

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McDonald’s Set to Increase Deals, Add Value for Customers Amid High Food Costs
Source: Pinterest

McDonald’s Set to Increase Deals, Add Value for Customers Amid High Food Costs

Source: Pinterest

Good news to those who love a good McDonald’s meal! The fast food chain is set to increase their deals for their customers really soon.

McDonald’s Conference Call

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Representatives of McDonald’s, one of the biggest food chains in the world, recently held a conference call with their investors. On this call, they addressed the pressing concerns around the fast-food industry’s “decreasing value” and the country’s ever-growing inflation. The representatives are hoping to give the customers better deals while simultaneously increasing their earnings, making everyone happy.

Customers Spending Less

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McDonald’s President and CEO Chris Kempczinski was a major contributor in the conference call, stating that the company is trying to find value as customers keep pulling back on spending. “The consumer is certainly being very discriminating in how they spend their dollar,” he said. “It may be more pronounced with lower-income consumers, but it’s important to recognize that all income cohorts are seeking value.”

Customer Spending Patterns

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The company has also noticed that the increased inflation across different parts of the world is greatly affecting consumers’ spending habits. Therefore, they would rather save their money or use it on things they consider more important than fast food. “The inflation that has occurred over the last couple of years in the U.S., I think, has certainly created that environment,” the company’s CEO said.

Disappointing Q1 Traffic

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The traffic that the company generated in the first quarter of the year, which ended in March, was quite disappointing. “It is worth noting that in Q1, industry traffic was flat to declining in the U.S., Australia, Canada, Germany, Japan, and the UK. And across almost all major markets, industry traffic is slowing,” Kemczinski said. Therefore, the company had a conference call to discuss it.

Disappointing Q1 Earnings

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McDonald’s reported a rise in its open-store sales by 1.9% from January to March. While it is positive, it is still not up to what the Wall Street investors predicted. The poll of analysts by FactSet reported that the investors were expecting a 2.1% increase by the end of the first quarter. However, this is still lower than what the investors usually see in three months.

The Difference in Pandemic and Post-Pandemic Growth

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Usually, McDonald’s sees a sales growth between 3% and 4% every year. However, the 2019 pandemic slowed down business for the restaurant as many other people started their own restaurants. Noting this, the company warned its investors that the fast-growing restaurants boosted by the pandemic will begin to slow down soon enough. Still, this did not prepare them for this disappointing Q1 turnout.

Importance of Creating Everyday Value

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“In the context of a difficult macro environment for the industry, we know our customers are looking for reliable everyday value now more than ever,” said Kempczinski. In addition, he emphasized the importance of creating everyday value for their customers to boost traffic. “There’s a lot of great value out there, but everyone else has a value message too,” he said.

Efforts to Bring Traffic Back

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The CEO kept emphasizing on finding better ways to drive back traffic to the restaurants. “I was impressed by the market’s ability to quickly identify an opportunity in their everyday value offerings to implement a new entry-level value platform, which is driving traffic back into our restaurants,” he said. Therefore, he believes they can achieve this by finding opportunities and adding values that will attract customers.

Recent Boycotts

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Are the recent online and offline boycotts affecting the company? The CEO said, “I think if you look at the impact of some of the boycotts in a few of our markets, I wouldn’t say things are getting any worse there…So maybe marginally better in some markets, but as I referenced on an earlier call, we’re not expecting to see any meaningful improvement in the impacts on that until the war is over, and we continue to have that outlook on what the Middle East conflict is going to do to our trends.”

CosMc’s Update

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On the call, Kempszinski was also asked about McDonald’s new test beverage restaurant located in Illinois and Texas. To this, he gave a brief response: “As I’ve referenced previously, we have — we plan on opening 10 restaurants, and it will be a function of unit volumes. It will be a function of margins, and it will be a function of what’s the capital that we need to spend to get these things built. All of that will drive our overall assessment of what the ROIC potential is.”

Enticing Digital Offers

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The CEO of McDonald’s also drew attention to the valor that the company is currently offering its customers while comparing them to that of other fast food chains. While on the call, Kempczinski opened their food app and noted that a Big Mac was selling for as low as $0.29. Furthermore, he pointed out that 90% of the offers in the country for meal bundles are usually only $4 or less, keeping McDonald’s as the top competitor.

50 Different Ways of Generating Value

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Kemczinski said on the call that the new plan is to note customer attitudes around values and their demands for each location. “And one of the things that’s going on in the U.S. right now is the value message that I was talking about. We’re doing it in 50 different ways with local value,” said Kemczinski. This way, McDonald’s can make informed decisions and prices unique to every area.