McDonald’s Cutting Drink Prices

McDonald’s Corp, which is reeling from a restaurant slump industry wide along with a slowdown in growth from its push into all-day breakfast, has shifted its look to beverages as a way to help pick up its business.

The world’s largest food-service company that last year was focusing its advertising on chicken sandwiches and cheeseburgers is planning to offer sodas at $1 and specialty McCafe drinks for $2 throughout the U.S.

It is turning to beverages of higher margin during a time when less expensive prices for groceries have prodded more Americans to remain home and eat.

The promotion for the drinks might also be helpful to McDonald’s in coping with the eventual food cost rebound.

McDonald’s has revamped its menu as well as marketing since CEO Steve Easterbrook took the reins nearly two years ago.

Along with introducing all-day breakfast, the CEO has been relying more on promotions and discounts in the U.S. In 2016, the fast-food chain advertised two for $5 and two for $2 deals to attract back diners lost after ending its dollar menu that was highly popular.

McDonald’s is the leader in the $228 billion fast-food industry in the U.S. that is losing growth. After last year’s growth of 2.4% in revenue, gains will reduce to 1.5% for 2017 and 1.6% for 2018, showed data from a recent researcher in the industry.

Shares of McDonald’s have gained 5% in 2017 which is nearly the same amount that the S&P 500 restaurant index has increased.

The promotion at McDonald’s, which begins in April, includes soft drinks of any size priced at $1. For a short time, customers will be able to purchase small beverages at McCafe like frappes and smoothies for just $2. At Chicago stores this past Tuesday, a small frappe in McCafe was priced at $3.09.

McDonald’s is planning to support the drink promotion with advertising nationwide.

This new strategy aims to make noticeable changes for its customers by adding a new layer of value for clients by adding more choices said the marketing department of the company in a statement.

The shift to drink from food might reflect an environment in change. Over the last several years, profits were helped by less expensive commodity prices but that might not continue. The consumer price index increased by 0.6% during January which was higher than anticipated.

Leave a Reply