Most Americans fully recognize the days of buying a cheeseburger for a dollar are long gone, but it's been a hard adjustment for many.
According to Chris Kempczinski, McDonald's CEO, the company has seen a drop in low-income customers after it raised prices due to inflation. McDonald's estimates menu prices increased by about 10% in 2023 to keep up with rising costs.
"Particularly among the low-income consumer, there's some transaction size reduction that we're seeing," Kempczinski recently told investors.
He added the company has not seen a drop-off in middle-income and upper-income customers.
In hopes of getting low-income customers back to restaurants in 2024, the company said it will focus on affordability.
"Providing our customers with affordable options has always been core to our brand, and it's even more important as consumers feel pressure on their spending, particularly the lower-income consumer," said Ian Borden, McDonald's chief financial officer. "We continue to listen to our customers by evolving our value offerings, maintaining strong perceptions in value for money and affordability."
After grocery store prices surged in 2022, restaurants saw larger price increases in 2023. According to the Bureau of Labor Statistics' consumer price index, food away from home increased throughout the U.S. by about 5.2%, while food consumed at home went up a mere 1.3% last year.
In 2022, food at home went up 11.4%, while food away from home finished the year 7.7% higher.
With inflation easing, McDonald's says price increases will relax.
Kempczinski acknowledged that eating at home has become more affordable compared to eating out.
"I think what you're going to see as you head into 2024 is probably more attention to what I would describe as affordability," he said. "So think about that as being absolute price point being probably more important for that consumer in a lower absolute price point to get them into the restaurants than maybe a value message, which is a two for six or something like that. Those probably are going to resonate a little bit less in 2024."
Historic prices versus now
The Smithsonian has a 1965 McDonald's advertisement showing the price of a hamburger at a Biloxi, Mississippi, location cost 15 cents, and a cheeseburger cost 20 cents. The advertisement shows a McDouble for 39 cents and a fish sandwich for 29 cents.
While this particular location closed in 2015, several other McDonald's are open in the area.
At a Biloxi, Mississippi, location, the cost of a regular hamburger is $1.89, the cheeseburger is $1.99, the McDouble is $2.79 and the Filet-O-Fish is $4.19.
When adjusted for inflation, the hamburger is 43 cents more expensive than in 1965, while the cheeseburger is 5 cents higher. McDonald's fish sandwich is now $1.37 more expensive than in 1965, when adjusted for inflation. However, the McDouble now would be $1 cheaper than in 1965.
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