Recent trends show that more low-income consumers are opting to eat at home rather than dine out due to the impact of fast-food price increases. McDonald's Chief Financial Officer highlighted this shift during the UBS Global Consumer and Retail Conference, noting that lower-income individuals are increasingly choosing to cook at home.
The rise in dining at home is attributed to the fact that inflation rates for dining out are significantly higher compared to purchasing groceries. Data from the Bureau of Labor Statistics' consumer price index revealed that the cost of meals at limited-service restaurants increased by 5.2% in the year leading up to February, while grocery prices only rose by 1% during the same period.
McDonald's, like other fast-food chains, raised menu prices substantially during the pandemic due to escalating wage and commodity inflation. The company reported a growth of over 30% in system-wide sales since 2019, largely driven by these price adjustments. However, with inflation showing signs of slowing down, McDonald's plans to moderate its price hikes moving forward.
Recognizing the changing consumer landscape, McDonald's aims to focus on affordability and value for its customers. The company intends to promote its value deals more prominently, such as offering bundles under $4 in the US and the McSmart deal in Germany for 5.99 euros (approximately $6.55).
Moreover, McDonald's plans to enhance its use of the mobile app to provide exclusive offers to loyalty program members. Emphasizing the importance of affordability, the company believes that its brand is well-positioned to cater to the evolving needs of consumers in 2024.
Despite the challenges posed by rising prices, McDonald's remains confident in its ability to adapt to changing consumer preferences. By prioritizing value and affordability, the company aims to continue attracting customers seeking cost-effective dining options.
