Originally Published: 06 FEB 24 14:02 ET
Updated: 07 FEB 24 10:03 ET
By Allison Morrow, CNN
New York (CNN) — Corporate America may be bumping up against the limit of its power to keep raising prices as consumers in some markets cry uncle.
At McDonald’s, which has repeatedly boasted about its ability to raise menu prices without denting sales, executives are finally acknowledging that customers need a break.
On Monday, as the burger chain reported weaker-than-expected sales at its US stores, CEO Chris Kempczinski addressed McDonald’s “affordability” problem, and indicated the chain would cut prices on some menu items.
“Eating at home has become more affordable,” Kempczinski said.
He’s right: Grocery prices are still high, but they rose just 1.3% overall in 2023, while dining out surged 5.2%, according to the latest Consumer Price Index report.
That’s putting pressure on lower-income consumers, a vital base for the chain.
“We actually saw that cohort” — customers making $45,000 or less — “decrease in the most recent quarter,” he added.
Kempczinski didn’t offer details on the timing or size of any price cuts. But his focus on affordability marked a shift from just a few months ago, when he boasted that US menu prices, which went up as much as 10% in 2023 alone, weren’t deterring sales.
“Even though we’re pushing through pricing, the consumer is tolerating it well,” he said in October analyst call.
In a statement to CNN, McDonald’s declined to comment on specific price cuts but reiterated its commitment to providing affordable options to consumers.
While inflation has slowed significantly, prices for everyday necessities remain high, and people are getting fed up. McDonald’s has become a regular target for social media users complaining about prices. Viral stories lamenting the cost of a Big Mac meal — particularly the $18 ones at a widely maligned Darien, Connecticut, location off I-95 — have become a TikTok genre unto themselves.
At the core of those widely shared sticker-shock moments is a genuine angst over the cost of basic needs like food — especially food that’s meant to be affordable.
On TikTok, it’s a common refrain for McDonald’s customers to say the company has gone too far, charging more than $3 for a single hash brown in some locations.
“Who told y’all y’all was that good to be charging that much for your food?” quips one user in a TikTok video titled “McDonald’s has gotten too cocky.”
Other popular videos call out the audacity of a medium French fry costing roughly as much as a Filet-o-Fish.
Because most McDonald’s restaurants in the United States are independently owned, prices vary depending on where you are. (So if you find yourself pulling off the highway for a quick bite at a travel center in Darien, one of the richest towns in America, you can reasonably expect your meal to cost significantly more than you would at a suburban drive-thru outside of Des Moines.)
Still, up until recently, McDonald’s found most customers were still willing to pay. And even now, wealthier customers appear undeterred, Kempczinski said Monday.
For middle- and high-income groups, “we’re not seeing any real change in behavior,” he said. “We continue to gain share with those groups. But the battle ground is certainly with that low-income consumer.”
In other words, it may be time to bring back the Dollar Menu. Kempczinski said McDonald’s would double down on its “D123” strategy, which prices some items between $1 and $3.
The-CNN-Wire
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