The CEO of fast food giant, McDonalds, has admitted that high prices have contributed to lower sales.
McDonald's CEO Chris Kempczinski told investors in a candid conversation that “value execution” has been an issue for the company. This was one factor that was within its control, he said, and “contributed to our underperformance”.
He also pointed to some external factors including the war in the Middle East and also a general slowdown in the fast food sector.
Kempczinski shared that global comparable sales for the company had dropped by 1% year on year for this quarter. He also reported that customers were showing more tendency to look for deals, ordering cheaper food items or buying less. The price increases had therefore "disrupted long-running value programs and led consumers to reconsider their buying habits”.
In May, CNBC reported that what McDonalds is seeing is part of a wider trend. Customers are pulling back from fast food places because the higher cost of living and rising food prices in restaurants had finally changed consumer habits. In a consumer price index report, some chains were showing a price hike of nearly 28% from 2019 to 2023. Customers were now shying away because of this; especially lower income consumers, he said.
"I think it's not even so much about consumers moving from us to others," Ian Borden, the chief financial officer of McDonald's, said. "It's about consumers in that low-income category, and I think families, which are obviously two big cohorts of our consumer base across most of our markets, just eating out less frequently than they have been previously."
Kempczinski said that the company was determined to “…reignite share growth in all our major markets regardless of the prevailing market conditions” but admitted that it won’t “happen overnight”.
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