McDonald’s Secret To Escaping The Effects Of Inflation
McDonald's has been among the few companies able to curtail inflation's effects. Now it's letting everyone in on its secret.
Countless businesses have begun to suffer from the compounding effects stemming from intense inflation. Even retail titans like Walmart and Target are buckling under the challenges that inflation brings. However, there is one company that has continued to be largely unfazed by the prevailing economic circumstances. And it’s none other than the golden arches themselves, king of fast-food – McDonald’s. Despite economic difficulties, McDonald’s was still able to come out on top.
McDonald’s came in with a solid 2nd quarter economic earnings report that largely rivaled what Wall Street analysts were forecasting. According to CNBC, while sales suffered in some regions of the world, overall McDonald’s was able to stake claim to a nearly 10% growth in global revenue. McDonald’s US properties also generated what amounts to a 3.7% increase in total profits. The fast-food icon is attributing its performance to its strong value items sales as well as an increase in the costs that were passed down to the end consumer. Simply put, McDonald’s inflation-combatting secret was to leverage its value mainstays and adjust prices in accordance with what the current market necessitated.
That being said, even though McDonald’s seems to have a crystal ball when it comes to knowing how to curtail inflation, it’s not to say that they did not encounter challenges. Also, not every figure in its latest earnings report panned out as expected. Some of this can be attributed to the circumstances occurring overseas. Still, overall, and especially compared to some other establishments, McDonald’s is one of the few that seemingly has a counterattack for inflation’s deadening chokehold.
In the United States, in particular, McDonald’s is attributing its earnings to both customer resiliency and the fact that customers have been leaning heavily into its relatively recently revamped rewards program. Its in-app rewards program is point based and allows customers to claim free items based on the number of points they have accrued. Conveniently, points accumulate quickly and rewards range from less expensive menu items like hash browns and ice cream cones to Big Macs and Happy Meals. To piggyback off its reward program’s success, the company has also been offering a slew of promotional deals and gimmicks by consistently partnering with celebrities and influencers. These draws have helped to lure people consistently to the golden arches, despite looming budgetary challenges.
Moreover, CNN pointed out that because inflation has caused food in the supermarket to skyrocket by a considerable amount many folks are likely seeing McDonald’s as a better deal in some instances. Thus, in some cases, individuals are likely opting to dish out $30 dollars for dinner for their family at McDonald’s plus snag a rewards deal versus spending that same $30 at the grocery store. Essentially, the psychology of perceived cost versus actual cost wins has been serving McDonald’s well.
Regardless of the reasons for McDonald’s inflation-resistant performance, the fast-food behemoth is doing a lot better than some. Kohl’s, Nordstrom, and Revlon are among the slew of businesses that have seen far better days. That being said, McDonald’s CEO Chris Kempczinski did admit that “The operating environment across the competitive landscape remains challenging.” Because of this Kempczinski asserted that McDonald’s is still planning for tumultuous waters ahead and not letting its better-than-expected performance cloud its strategic judgment.
