McDonald's Is Winning At Inflation

We’re paying more for a taste of the Golden Arches, but we also don’t seem to care.

Despite increasing menu prices, McDonald's is doing better than most other chains in the same quick service category, reports Yahoo Finance. The brand's third quarter U.S. sales had an increase of 6.1%, even as menu prices went up by 10% year over year.

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Ronald and friends are making all the right moves, and the current economic climate is only making it easier for McDonald's to get a piece of everyone's paycheck even many Americans are on a tighter budget.

How McDonald’s brand loyalty keeps people spending

Simply put, McDonald's recent promotions have just been hitting lately. Between the unprecedented success of its Adult Happy Meal promotion and the return of nostalgic 'Boo Bucket' Halloween pails this season, McDonald's has demonstrated that it knows which limited-time offers will make us want to hand over our entire wallet.

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The chain even tested the limits of brand loyalty by setting a high barrier to entry on its Adult Happy Meals. The $12 Cactus Plant Flea Market Box included either a Big Mac or 10-piece Chicken McNuggets Meal with fries and a modernized throwback McDonaldland character figurine—more than most people pay on a typical McDonald's run if they make use of the Dollar Menu. The aftermath of the boxes' release speaks for itself: they not only sold out everywhere but also led to a number of eBay listings (though some were a joke) from people trying to cash in on the demand for designer Happy Meal toys.

As for the Boo Buckets, the Halloween Happy Meal pails had plenty of people amped up before they even arrived. Halloween was the last day to get your hands on one (until next year, maybe) so the exact numbers regarding how successful the promotion was are yet to be determined, but I have no doubt that the buckets increased traffic to McDonald's locations just as the Cactus Plant Flea Market Boxes did.

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What McDonald’s says about the economy

Although much of McDonald's recent success is due to one-off limited-time promotions, there are other factors at play that just happen to be doing the chain a favor. One of them is how heavily inflation is weighing on food prices.

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The effects of inflation are so evident that it's actually no longer much more affordable to purchase groceries and cook from scratch than it is to purchase takeout or sign up for meal deliveries or meal kits.

"Bottom line is consumers still have to eat, so you're either eating at the grocery store or you're eating at restaurants," Peter Saleh, managing director and restaurant analyst at BTIG, told Yahoo Finance. "Grocery store pricing is up more so than restaurant pricing. At this point, restaurants are actually providing a little bit more value than they have historically."

Saleh added that the only change that may lead to consumers pushing back on a more expensive McDonald's menu is if the country goes into a recession and people begin to lose their jobs. Even then, that doesn't mean customers would abandon McDonald's completely. Fast food is more affordable than most other food establishments by design, so if people are truly trying to get more value for their money, they'll continue to turn to fast food deals even if the price of those deals ticks higher.

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It takes a lot for people to turn away from their favorite food establishments, but the limit does exist. But McDonald's has seemingly found a tactic that works for the chain: delivering highly anticipated and much hyped promotions that not only entice a wider customer base, but distract from the rising prices across the normal menu.

 

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