COST OF LIVING

Cost of living crisis takes a big bite out of McDonald’s profits

By our African Marketing Confederation News Team | 2024

Consumers aren’t munching on Big Macs like before, as the business battles higher costs, boycotts and people wanting to spend less for more.

The global cost-of-living crisis is taking a bite out of McDonald’s profits, with the fast-food giant seeing its sales around the world fall for the first time in four years.

Its sales for the April-June financial quarter went down 1% and its net income by 12%, which is the company’s worst performance since 2020, when the world was in shutdown due to the pandemic.

McDonald’s expects this trend to continue for the next few quarters, and says it intends to implement menu changes and meal-deals to lure back cash-strapped and inflation-weary consumers.

Photo by Rodolfo Gálvez from Pexels

Inflation is also hitting the company’s cost structure, with CEO, Chris Kempczinski, reporting that costs for paper, food and labour have increased as much as 40% in some markets.

In the Middle East and certain other countries, including France, there have also been consumer boycotts because of perceptions that McDonald’s supports Israel in the Gaza conflict. It denies the claims.

A comprehensive pricing rethink is needed

Among the recovery strategies is a “comprehensive rethink” of pricing, with a focus on discounted ‘value meals’.

There have been sales successes such as a $5 happy meal in the US and a ‘three items for £3 ($3.86)’ in the United Kingdom. These were intended to be (Northern Hemisphere) summer deals, but may now become permanent offerings.

Kempczinski said McDonald’s must provide broader value and emphasise that message with better marketing. “Trying to move the consumer with one item or a few items is not sufficient for the context that we’re in,” he told investors.

Other menu changes are in the offing. The company is testing a new value product, the Big Arch double burger, in three markets and may make it a permanent part of a new menu strategy.

As one headline-writer pointed out – in reference to McDonald’s famous ‘I’m lovin’ it’ jingle – “consumers aren’t lovin’ it right now”.

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