Inflation is redefining ‘value’ in fast food chains

If a value menu deal sounds too good to be true, there’s a good chance the restaurant will agree—with food prices still rising, some brands are finding it extremely difficult to maintain their dollar menus. McDonald’s, for example, is raising the price of a cheeseburger on its menu by up to 20% in the UK.

The Guardian reported on Wednesday (27 July) that the burger chain is raising the price of its 99p cheeseburger to £1.19, the first increase in 14 years, citing rising food costs and a sign similar price increases will come in the near future.

“This summer, our restaurants will add 10-20p to a number of menu items that have been most affected by inflation,” said Alistair Macro, CEO of McDonald’s UK and Ireland. “We understand that any price increases are not good news, but we have delayed and reduced these changes for as long as possible.”

According to a recent press release from the UK Office for National Statistics, consumer prices for food and non-alcoholic beverages in the country rose by 9.8% y/y in June 2022, a marked increase from +8.7% y/y. High year in May. In addition, restaurant and accommodation prices rose 8.6% year-on-year in June after rising 7.6% year-on-year in May.

The news comes after the Wall Street Journal reported earlier this month that in the US, in 16 of McDonald’s 56 local markets, local co-ops voted to announce value menus instead of dollar drinks to enable them to raise prices. of drinks.

“Franchise owners set prices and have the flexibility to create promotions that will increase demand locally,” the restaurant brand told the outlet.

Related news: Amid rising food and beverage prices, McDonald’s sites withdraw dollar drinks

In the United States, overall food prices have risen significantly in the same period. The Consumer Price Index for All Urban Consumers (CPI-U), published by the US Bureau of Labor Statistics (BLS) earlier this month, revealed that food prices rose 10.4% year-on-year in June. Meanwhile, food prices away from home (ie the restaurant) rose 7.7%.

Given that McDonald’s tends to be a leader in the QSR space, it’s possible that as the company continues to raise prices on its value propositions, other brands will soon follow suit. Other dollar deals may soon have to revise their names to appreciate the listings as brands rethink their pricing.

Early this year, Domino’s, the QSR pizza giant, announced in a presentation at the 2022 ICR conference that it was changing its $7.99 chicken wings deal, making the offering available exclusively through digital channels and reducing the number of wings per order from 10 to eight. .

Read more: Brands turn to off-the-shelf formats to boost profit margins

Meanwhile, Costco, for its part, has been sticking with a key value list item, no matter how impractical the deal may be. The company’s CEO said earlier this month that the brand’s hot dog deal, $1.50 for a hot dog and 20 ounces of soda, which has been in place since 1985, isn’t going anywhere.

You might also like: Costco CEO: Membership Fee, Hot Dog Pricing Won’t Change

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