McDonald’s CEO, Chris Kempczinski has come clean about the effect of price increases on the company’s menu items.
In response to the almost immediate drop in customer patronage, McDonald’s recently revealed that they would be making the affordability of their food foremost on this year’s priority list.
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At the center point of McDonald’s pricing crisis are two food items. The first is the Big Mac Combo, which now has a single serving going for $18! That is over $15 more expensive than it was in 2000.
Financial analysts in the food franchise are confident that the price hike is responsible for the company’s inability to attain Wall Street projections in this quarter.
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Prices and Production Costs are Soaring Everywhere
In defense of its price changes, McDonald’s management blamed the climb in the global inflation rate. The inflation was also linked to the ongoing Russia-Ukraine war.
Unfortunately for McDonald’s, inflation did not handicap outlet sales alone. Instead, the company’s shares also took a hit on the New York Stock Exchange. The value of McDonald’s shares tumbled+ by almost 4%, going for $285.97 per share earlier this week.
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During an earnings call with company analysts earlier this week, Kempczinski admitted that a sizable fraction of McDonald’s customers are low-income earners. The highest pay of people in this segment is $45,000 per annum.
So, many of these low earners are staying away thanks to price increases in McDonald’s food units. In fact, many of them are now embracing home-made foods.
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Another reality that further reinforces the decision of low-income earners to prepare their meals is the crash in grocery prices.
So, Kempczinski admits that despite the inflation, McDonald’s would have to adopt an affordability poise to win back the hearts of the economically susceptible. However, no one can explicitly explain what the CEO means yet. However, it may imply a future cut in fast food quality.
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The Potential Outcome in the Near Future
However, McDonald’s restaurant analyst Mark Kalinowski has shed a bit more light on the unfolding drama. He predicted that the company’s coping mechanisms and affordability mantras would not mean fast food prices would crash. According to Kalinowski, prices may still increase.
However, unlike last year’s sudden price hike of about 10%, the price changes will be a bit more steady as the year progresses. They may come in pockets of 2% and 3%.
E-Commerce to the Rescue
In addition, Kalinowski suggests that the final Hail Mary, which McDonald’s can throw into the affordability mix, is a targeted deal on the company’s mobile app. By offering in-app discounts, many customers of McDonald’s are likely to resurface.
McDonald’s has been convicted before the court of popular opinion. First, customers who have to pay much more than what they are used to for their regular take-outs are posting their experience on social media.
How the Israel-Hamas War Did McDonald’s In
Next, another pivotal incident played out right after the October 7 Hamas attack. One of McDonald’s Israeli franchises offered to give Israeli troops in Gaza free meals.
Forgetting that locals own these international franchises, an angry mob in neighboring Lebanon broke into a local McDonald’s outlet and left the place in tatters.
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The Expensive Price of Misinformation
So, part of the current woes of McDonald’s is thanks to widespread misinformation, particularly at international outlets claiming that the company is taking sides in the ongoing Middle Eastern crisis.
Interestingly, about 18,000 McDonald’s outlets are located in the Middle East. These Middle Eastern franchises make up about 10% of McDonald’s international sales despite being locally owned.
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