The fast-food franchise giant reported fourth-quarter 2024 global comparable sales of 0.4 percent, as U.S. sales decreased by 1.4 percent.
News Analysis
A slight rise in international sales saved McDonald’s top line from a significant decline as consumers became more price-sensitive and looked for deals in the quick-service industry. This leaves little room for price hikes for restaurants wanting to maintain and expand market shares.
This week, the fast-food franchise giant reported fourth-quarter 2024 global comparable sales of 0.4 percent, as U.S. sales decreased by 1.4 percent.
This rise in international sales is a turnaround from the third quarter, when global sales dropped by 1.5 percent. It also helped McDonald’s consolidated operating income rise by 2 percent (3 percent in constant currencies) despite its adherence to a “value menu,” a low-priced menu.
“McDonald’s domestic same-store sales decline of -1.4 percent was not unexpected, given the lingering impact of last year’s E. coli outbreak,“ R.J. Hottovy, head of analytical research at Placer.ai, told The Epoch Times via email. “More importantly, McDonald’s appears to be rebounding by doubling down on both value offerings and menu innovation.”
As CEO Chris Kempczinski explained, this is part of the company’s strategy to appeal to price-sensitive consumers.
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“Accelerating the Arches continues to be the right strategy as we focus on growing market share,” he said following the fourth-quarter financial results. “We’re playing to win, focusing on our customers with outstanding value, exciting menu innovation, and culturally relevant marketing.”
These words echo a similar message Kempczinski delivered a year ago: “We have a clear trajectory for future growth as we continue to build on the brand strength, global footprint, and digital ecosystem that has resulted in unparalleled competitive advantages and cemented McDonald’s as one of the world’s leading consumer-facing brands.”
As with other restaurant chains, McDonald’s has faced several challenges at home and abroad, such as higher food material and labor costs, natural disasters, pandemics or acts of war, terrorism, or other hostilities.
Some restaurant chains have coped with the top two challenges—food and labor-cost inflation—by hiking prices to maintain profitability at the expense of sales growth, which hurts market growth in the long term. For instance, Chipotle’s price hikes have helped the company’s profitability in the short term, but hurt its sales growth as consumers “traded down” and searched for less expensive alternatives.
However, McDonald’s has refrained from significant price hikes. Instead, it introduced a new value proposition menu, like the $5 value menu, appealing to price-sensitive customers during elevated inflation, which has been squeezing family budgets for low and middle-income families, leaving little room for these consumers to dine out.
Adapting to new market conditions by adopting a new menu has been an innovative strategy that has made McDonald’s an enduring franchise. It has captured the psychology and wallets of multiple generations of diners at home and abroad. The company’s adaptation and innovation allowed it to ride one emerging social trend after the other and turn a market niche into a mass market.
According to Hottovy, Placer.ai’s data show improving visitation trends following the launch of the McValue platform and the Buy One, Add One for $1 promotion, while competition for lower-income consumer visits remains intense.
Meanwhile, “the company’s latest menu innovations—including the return of snack wraps, the Chicken Big Mac, and new beverage offerings—should help drive further traffic as the year progresses,” he said.
McDonald’s rode the baby-boomer trend in the 1960s, the growing ranks of teenagers, and women’s rising labor force participation, offering fast and inexpensive food. The company’s introduction of the “Speedee Service System“ established the principles of the modern fast-food restaurant. McDonald’s successful expansion internationally transferred the American Way of Life to many countries worldwide. Still, McDonald’s needed to adapt to the social context of each country, which was accomplished by franchising to locals in many different countries.
“McDonald’s isn’t just a fast-food chain to me,” Nick Spivak, head of business development at IT Monks, told The Epoch Times via email. “It’s a masterclass in marketing psychology, and I can tell you exactly how it works because it works on me, too.
“I don’t go to McDonald’s because it’s the best food. I go because it’s predictable and fast, and it hits some deep-rooted craving I didn’t even realize I had. That’s the magic. The brand doesn’t just sell meals. It sells a feeling, a habit, and an instant decision that requires no effort. I don’t need to check reviews, think about the menu, or wonder if it will take too long. I already know. And that is precisely what they want.”
Spivak sees McDonald’s marketing beginning with catching diners’ interest in childhood. “The toys, the jingles, the colors, the smell. It works like a well-oiled machine to keep McDonald’s top of mind,” he explained. “And even now, as someone who understands the strategy, I still catch myself grabbing a burger just because it’s there.”
“This isn’t just about food. It is about consumer behavior, habit loops, and the power of branding done right,” he concluded.
