McDonald's one dollar drink deals may be an inflation casualty

Mario Tama/Getty Images News

Many McDonald's Corporation (NYSE:MCD) locations are doing away with the well-known $1 drink offering as the restaurant chain battles through inflation costs of its own.

Sources tipped the Wall Street Journal that at least 16 restaurant coops voted to advertise the chain's value menu, instead of the dollar drinks. Some franchisees have already lifted soda prices by several dimes, with at least one noting that the shift has "significantly improved" profits.

During a conference appearance in June, McDonald's (MCD) execs acknowledged the inflation reality, while also stressing that value and affordability were lynchpins of the brand.

"We're being very conscious to ensure that we kind of stay on the side of the consumer as we make decisions through this to ensure those really important fundamentals of our business around value and affordability stay as strong as they can." (read the full transcript)

McDonald's (MCD) has been a notable outperformer over the last six weeks with a 0.61% gain vs. the -7.47% drop for the S&P 500 Index.

McDonald's (MCD) is expected to report earnings sometime during the last week of July. See the consensus estimates.

Comments

[dynx]

The margins on fountain drinks are stupid high. Good way to offset inflation in other areas without much impact on purchases. Increase by 20% and it doesn’t really make a difference to the consumer but it all flows through.

[bill h illify]

Russian people are dissatisfied with the latest Russian copy of MCD.

[MoneyPig]

No, article stands corrected it is a war casualty. MCD lost the revenue and the operating margin contribution from it's Russsian operations. So, US domestic prices have to go up or MCD will suffer an earnings hit.

If you want to see how badly Joe Biden is damaging the Russian economy search for McDonald's videos in Russia about the "new management". They seem celebrating it. Russians are out having a good time. They got food. They got gas. Life is good.

While Joe Biden turns the United States into North Korea. The news reporting here is all lies. Check out the user videos before the they get censored and removed. After all random people comparing the new McDonald's to the old McDonald's is Russian propaganda.

Joe can't have any of that. When his price setting campaign fails for Russian oil he will start shouting "Abortion! Abortion!" As a shareholder you should watch the videos. As an American, you got the shaft again.

For a bunch of people Hunter Biden took money from.

[JDoe20]

@MoneyPig
BUT, it was only $3.5 million. That’s nothing to the BCF.

[MoneyPig]

@JDoe20

No one tells the truth anymore. I don't like it. They key takeaway for me is lost operating margins at MCD causing higher domestic prices. I own oil stocks and potash stocks.

I don't expect Q2 earnings to be good. We are likely in a recession, but even that the Federal Reserve cannot seem to say. The Fed says no inflation one week, then backpeddle the next week.

Even worse I realized why my health insurance is so high--it is 28,000 a year and we have no health conditions--because to avoid openly raising taxes for Medicaid politicians are allowing hospitals to overcharge everyone else. They are underpaying for services with Medicaid to avoid raising taxes and allowing hospitals to transfer costs.

That's the circumstances we are in. Whatever happened to the Green New Deal? Biden invoked Roosevelt with "New Deal" then delivered nothing. It is hard to find any faith in these people.

[Safety Dance]

Even with inflation.. those drinks cost pennies. Most expensive aspect may be the cup to put it in and lid.

[dynx]

@Safety Dance and in some states the fines for giving plastic straws!

[J-Flo]

We don’t eat there anyways, just collect their dividend! 👌

[starsandstripes]

It must be a slow news day

[HunterKiller89]

Fun fact: a large soda costs the vendor something in the ballpark of $0.08 per cup, and it's filled with about $0.01-$0.03 of soda (i imagine their coffee is similarly priced). So yeah, raising the price a dime basically covers the entire cost, again.

[Desmater]

Seems like good news for $KO . Passing on cost and increasing margins.

[Ta0]

Oh no! (sad). I go here for the $1 coffee. It's surprisingly good.

[Who Moved My Cheese]

With all we know, how anyone could still eat that poison is beyond me.

[Keops]

@Mlon Eusk

What do we know, enlight us

[JDoe20]

@Mlon Eusk
How sad do you have to be to come to a mcd article so you can say that? Truly sad, sell your guns. I’ll pray for you.

[CS15]

@Mlon Eusk funny how this is one of my best performing stocks!

[dpeterson5620]

It has always bothered me that inflation is seen as just a fact of life, and everybody is losing. Someone has to be winning. It's just not us.

[JDoe20]

@dpeterson5620
Those who just bought a $5M home in a 30 year mortgage?

[dynx]

@dpeterson5620 yeah. In reality with technological advancements deflation should occur at some points in the cycle. It’s the boogie man though. Can’t allow that! What if people slow down on consumption and save money!?!? Oh crap! Then we’d have less sales of useless junk and more sales and profits of actual necessities! Sounds terrible.

[WNB]

buying food at mcdonalds is an inflation casualty.

[Chris Lau]

The real hero is AriZona for 99 cents.

[starsandstripes]

@Chris Lau yes if you are fond of corn syrup.

[littlecubbie2019]

@Chris Lau they aren’t .99 where I live and it’s not a sprawling urban area.

[RWilliam]

Boycott McDonald’s until they bring back grilled chicken and salads! Paul Newman is rolling over.
You can have you chicken anyway as long as it’s fried that’s so healthy!

[haoleboy1967]

$1.19 in St. Louis
The drink is available for $1 if you use the app
But the app offers better deals usually than the lousy 20 cents on the drink

[Apt Learner]

I can't tell if the comments here are happier that the poor will spend a higher percentage of their limited income on food and drink or if they are happier that the poor will get fewer calories. I thought the narrative concern was 'food insecurity'?

[HPBunker]

@Apt Learner

"I can't tell if the comments here are happier that the poor will spend a higher percentage of their limited income on food and drink or if they are happier that the poor will get fewer calories. I thought the narrative concern was 'food insecurity'?"

In the United States, poverty is positively correlated with obesity. Poor neighborhoods may experience food insecurity in the sense that if you want to find a store that sells fresh produce, you're out of luck. But very few Americans experience food insecurity in the sense of not getting enough calories.

There are several government programs that address true food insecurity, such as food stamps and WIC (women, infants, and children) checks. The latter especially require that recipients spend their food dollars on nutritious food, not 32 oz sodas at fast food restaurants.

Anyone who finds McDonald's pricing too high can prepare their own, far more nutritious food at home for less money. Better yet, become a vegetarian. Tofu or beans and rice are complete proteins that cost far less than even the cheapest, fattiest ground beef. Milk and eggs are of course also complete proteins that cost less than meat and involve much less animal suffering and death.

But to put it very simply, every human being on earth would be better off choosing water to drink over soda, no matter the price of the soda. Drinking a big glass of carbonated corn syrup with your meal spikes insulin levels, damages the pancreas, and over time leads to insulin resistance and type 2 diabetes. That's in addition to the weight gain and related health problems resulting from consuming empty calories in the form of giant sodas.

Most of what McDonald's sells is not food. "Chicken" McNuggets are ground up skin and fat, breaded and deep fried. Even the "fish" sandwiches derive almost all their calories from frying oil and the bleached white floor in the buns. It's a disgusting business all around.

[Apt Learner]

@HPBunker I don’t disagree a bag of rice and frozen chicken would be healthier, but comments such as this just come off as privileged.

[HPBunker]

@Apt Learner

Is it privileged to say that no one should drink soda? Doesn't matter if you're rich or poor. It's the same as saying that no one should smoke cigarettes or drink alcohol. Some things that people do are simply bad for them.

I remember many years ago that Bloomberg, when he was mayor of NYC, wanted to prevent food stamps from being used to buy soda. He got the same "privileged" argument used against him by so-called liberals, and the proposal went nowhere.

But think about it: Does paying poor people (through food stamps) to buy soda so they get fat and develop type 2 diabetes and heart disease, then paying them again (through Medicaid) for stomach stapling surgery and a lifetime of insulin shots make any sense as government policy?

It's perfectly reasonable to take a position that taxpayer money should not be used to subsidize stupid, self-destructive behavior. And whether it sounds privileged or not, it's equally reasonable to say that poor Americans will be better off if McDonald's raises prices to the extent they can no longer afford 500 extra calories of soda each day.

[JD 90065]

"We're being very conscious to ensure that we kind of stay on the side of the consumer..."

Is that like "kind of" being faithful to your spouse?

[bill h illify]

Sausage egg McMuffin to soften the loss!

[HPBunker]

How will Americans maintain their bulging waistlines without cheap carbonated corn syrup from McDonald's? I'd hate for everyone to have to buy new, smaller clothes in this inflationary environment.

Pro Tip: You can save a few bucks by buying corn syrup in gallon jugs and drinking it straight from the container at home. Then just order a water at McDonald's to wash it down.

[RWilliam]

@HPBunker corn syrup is toxic causes diabetes, diet pop makes you gain weight. Toxic food.

[Russell's Decalogue]

@RWilliam First law of toxicology: The poison is in the dose.

So just space out your visits well. And you don't have to go nuts like I do, dropping in about once every three years. A few times a year is fine.

[wellsc]

@HPBunker Thanks for the idea. I’ll try it next time I need to wash down my ground up skin and fat, breaded and deep fried.

[Churchill32]

I replaced McDonald's with In and Out Burger, long ago.

[JDoe20]

@Churchill32
Deadbeat who can’t afford to invest, ehh?

[Churchill32]

@JDoe20 Takes one to know one.

[JDoe20]

@Churchill32
Oww, that hurt . . . . . do you know this is an investment site?