McDonald's CEO Plans Price Changes
McDonald's is losing some of its low-income customers, and it sounds like the fast food chain has a plan to get them back.
During an earnings call last week, McDonald’s CEO Chris Kempczinski admitted that the company's sales with low-income customers have been slumping in recent months despite the company's best efforts to appeal to those customers.
Now, it sounds like the company is planning to make some changes to its pricing in order to address those concerns, which is good news for anyone who is hoping for some McDonald's deals in the future.
McDonald's Courts Low-Income Customers
McDonald's has made several moves in recent months in an attempt to appeal to budget-conscious customers.
Last summer, the fast food chain rolled out its $5 Meal Deal. McDonald's then debuted its McValue menu earlier this year, which included a Buy One, Add One for $1 deal as well as the new Daily Double deal.
McDonald's had a very successful launch of a budget item last month when it brought back the Snack Wrap. The item was so popular that it even led to a lettuce shortage in some McDonald's locations due to the unexpected demand.
McDonald's Still Losing Low-Income Customers
Despite the company's best efforts, Kempczinski said that McDonald's is still losing its budget-conscious customers, which is a problem for McDonald's.
“The U.S. remained challenging as visits across the industry by low-income consumers once again declined by double digits versus the prior year period,” Kempczinski said via The Street. “Reengaging the low-income consumer is critical as they typically visit our restaurants more frequently than middle- and high-income consumers.”
Kempczinski pointed out that these low-income customers are facing a challenging and uncertain economy, which could contribute to the loss of customers.
“With the low-income consumer, despite improvements in wage gains, real incomes are down,” said Kempczinski. “That absolutely is going to put pressure on visits into the QSR industry. Second thing is there is a lot of anxiety and unease with that low-income consumer. I think we could all speculate the reasons for that, probably tariffs and the impact that that might have, questions around employment situation.”
McDonald's Looks to Make Price Changes
As a result of the loss of these target customers, it sounds like McDonald's is planning to make some major price changes.
During his recent earnings call, Kempczinski indicated that the company planned to make some pricing changes to appeal more to budget-conscious consumers. In particular, Kempczinski seems to want to see more combo meals priced under $10.
“Today, too often, if you’re that consumer, you’re driving up to the restaurant and you’re seeing combo meals (that) could be priced over $10, and that absolutely is shaping value perceptions in a negative way,” Kempczinski via The Street. “So we’ve got to get that fixed.”
While McDonald's generally allows each franchise to set their own prices and does not set national price minimums or maximums, Kempczinski thinks that there is value in a nationally advertised price point that is consistent throughout the country.
“I think there still is absolutely a need and a benefit for having nationally advertised price points,” Kempczinski said. “And we know that when you have a nationally advertised price point, it drives significantly more incrementality than if everybody is off sort of doing their own pricing, which is what we’re doing with the Snack Wrap, the $2.99.”
Needless to say, it sounds like McDonald's is set to make some customer-friendly price changes, which is good news for all of us consumers.