October 11th 2024.
Employees at McDonald's have recently received a not-so-pleasant message: brace yourselves for another tough year ahead. The fast food giant is gearing up for yet another challenging period, and their strategy is to rely on a particular type of product as customers continue to tighten their belts.
The news came as a surprise to many, as McDonald's experienced a significant drop in global sales during the summer - the first time in almost four years. Unfortunately, the forecast for the upcoming months isn't looking any brighter for the Golden Arches.
During a recent event at Boston College, Chief Executive Officer Chris Kempczinski shared his thoughts on the matter, stating, "We're already discussing 2025, and my message to our teams is clear: we need to be prepared for another challenging year." Kempczinski emphasized the importance of having a strong value proposition in all markets, especially during times of economic uncertainty.
In an attempt to stay competitive, McDonald's introduced a new promotion in June - the $5 Meal Deal, which included a McDouble, four-piece chicken nuggets, a small fry, and a small fountain drink. According to Kempczinski, the company's best bet is to focus on chicken as it allows them to offer affordable prices to their customers. He explained, "It's much easier to provide value with chicken products than with beef products," as chicken is significantly cheaper per pound.
The decision to prioritize chicken comes as no surprise, especially since beef prices have been on the rise. In fact, Kempczinski mentioned that beef costs nearly twice as much as chicken, which has become increasingly popular in recent years. Other executives in the industry also share this belief, and they anticipate that customers will continue to feel the effects of inflation for the next few quarters.
Despite their efforts, McDonald's reported a double-digit decline in worldwide sales in July. As a result, one of the leading french fries producers in North America, and a significant supplier for McDonald's, had to close down a factory in Cornell, Washington. Lamb Weston's CEO, Tom Werner, attributed the closure to weak demand for frozen potatoes and a decrease in restaurant traffic. He also expects this trend to continue into the fiscal year 2025.
Interestingly, even the $5 Meal Deal, which featured a McChicken sandwich or a McDouble, four-piece chicken nuggets, a small fry, and a small fountain drink, did not provide any relief for the potato maker. Werner explained that customers were opting for smaller portions, which led to a decrease in demand for their products. Without a product like chicken to lean on, Lamb Weston had no choice but to shut down the plant, resulting in the loss of 375 jobs.
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