Customers Feel Burnt Out by Inflation
It seems that in the past few years life has become unaffordable. Many people have been complaining that even a simple meal at McDonalds raised well past reasonable levels.
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Issues like fast-food inflation and shrinkflation (the practice of companies selling a little bit less in a product for the same price) has caused many customers to cut down on spending entirely.
Big Mac Gone Insane
A post by a user on the social media platform X went viral last summer when a man stopped in a McDonalds in Connecticut to purchase a simple Big Mac meal.
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He was startled to see that the classic burger combo would cost a staggering $17.59. While prices can vary throughout the state’s regions, and even within airports, the outrageous price for what should be a cheap lunch had many customers scratching their heads at the increase.
McDonalds Hit By Cost of Goods Increases
The fast-food giant claims that the reason for the massive increase in their everyday prices is due in part to inflation of goods, rising wages, and increased transportation costs.
Source: Wikimedia Commons
Many executives say that the increase in prices simply reflects the cost of doing business.
Global Profits Remain High
Unfortunately, part of the reason that many big businesses choose to raise their prices so much is the quarterly desire to improve profits. Businesses operate on a system that states that profits need to be constantly rising. If not, this means that sales are dwindling and the value of the company also goes down.
Source: Rob LaRosa/Wikipedia Commons
In the case with McDonalds, raising the price on a few menu items might not be a big hit to the consumer day-over-day, but for a global company this means their corporate profits remain high.
Executives Reaping Wealth
The gross annual profit in 2023 for the mega-corp was $14.563 billion. Their profit and chairman also made an exorbitant salary due to the outrageous prices.
Source: @pubity/X
Last year, Chris Kempczinski, the CEO and Chairman, made $19.2 million in salary, bonuses, and stock options, according to federal securities findings.
Global Sales Slowing
Now that prices have become inflated and customers aren’t happy with the value, countries like the U.S., Australia, Canada, Japan, the United Kingdom, and Germany have all lost revenue.
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The trend spells a concerning new pattern for the country who continue to hope to raise corporate profits.
Pinpointing the Issue
In a press conference call with investors, Kempczinksi said that “The consumer is certainly being very discriminating in how they spend their dollar.”
Source: @McConalogue/X
“It may be more pronounced with lower-income consumers, but it’s important to recognize that all income cohorts are seeking value,” he said while reassuring shareholders that the issue lies in the value that customers want for their hard earned money.
Not Living Up To Wall Street Predictions
In the past year, stores that have been open for at least one year rose around 1.9% worldwide. However, the small increase did not live up to big predictions for the company.
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Wall Street forecasted that the company would have a 2.1% overall sales increase worldwide in the January – March period of last year.
Offering Meal Deals To Bring Back Loyal Customers
In an attempt to change the current slow trajectory growth, the company plans to focus more on value deals for their loyal customer base.
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Kempczinksi noted during the conference call with investors on Tuesday that 90% of U.S. restaurants were offering meal bundles for $4 or less; a price point that most consumers are familiar with.
International Franchises Slumping
Outside of the U.S, many international franchises are also having trouble keeping up with consumer needs. A 0.2% decline was noted in the Middle East and Asia.
Source: Tokoroten/Wikipedia Commons
In the Middle East and Muslim-majoritt countries like Indonesia and Malaysia, many people have taken part in a massive boycott effort to reject McDonald’s support of the ongoing attacks on the Gaza strip.
Marketing To the People Concerned with Palestine
In an effort to dissuade customers from protesting their stores, McDonalds also hopes to ramp up marketing campaigns in order to quell dissent.
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However, the company has also expanded into more than 225 stores in Israel after buying out a franchise called Alyonal Limited.