McDonald's to decrease prices of combo meals to reclaim cost-conscious customers
McDonald's Revamps Strategy to Cater Budget-Conscious Consumers Amid Inflation
Fast food giant McDonald's has announced a strategic shift to cater to budget-conscious consumers amid rising inflation. The new strategy, which focuses on price cuts and rebranding affordable meal options, aims to balance affordability with franchise stability.
In a move to slash costs, McDonald's has reduced prices on eight popular combo meals by approximately 15%. These combos now cost less than buying the items separately. The company has also revived the "Extra Value Meals" branding, featuring $5 breakfast deals and $8 Big Mac and McNuggets combos.
The strategy also includes digital engagement, with app-exclusive deals accounting for about 30% of U.S. sales. Localized menu innovations are also being introduced to match regional preferences. AI-driven kitchen efficiencies further improve operations.
McDonald's is supporting franchisees financially to maintain stable margins (75-85%). The company is also leveraging centralized cost management and royalty income to sustain profitability.
The new strategy is part of McDonald's efforts to boost its value proposition and rejuvenate traffic among budget-conscious consumers. In January, McDonald's began rolling out a new "McValue" menu category offering a "Buy One, Add One for $1" option. Local franchisees are also launching their own special deals on items such as the McGriddle and app-exclusive offers like 20% off $10 or more.
Later this year, a $5 breakfast and $8 Big Mac and McNugget combo meal special will run. The average price of a Big Mac in the U.S. in 2019 was $4.39, according to McDonald's U.S. President Joe Erlinger. The average cost of a Big Mac in the U.S. in 2023 is $5.29, an increase of 21% with all inflationary pressures factored in.
Erlinger has expressed concern over the belief that high prices of a Big Mac have risen 100% since 2019. He blamed "poorly sourced reports" for contributing to the narrative that McDonald's raised prices significantly beyond inflationary rates.
The company's CEO has also stated that California's minimum wage hike is driving labor inflation. Despite these challenges, McDonald's stock ticker MCD has seen a 2.67% stock surge and robust operating margins.
McDonald's declined to comment on the matter, but Erlinger stated that while high-priced burgers exist, they are an exception, not the norm. The company is continuing to try to boost its value proposition and rejuvenate traffic among budget-conscious consumers.
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