Companies Counter Pushback on Price Increases With Promotions

A recent statement from the president of McDonald’s USA, Joe Erlinger, denied reports claiming that the chain had doubled prices on certain items over the past decade. However, he did acknowledge that the average price of a Big Mac has increased by 21 percent since 2019. The media, politicians, and consumers are scrutinizing rising prices, debating whether they are the result of price gouging or companies’ rising costs. Regardless, consumers have reached their limit and are growing dissatisfied.

In the first quarter, McDonald’s earnings fell short of analyst expectations, with the company’s CEO, Chris Kempczinski, attributing this to an increasingly discerning consumer base. Other major companies, such as Starbucks, Target, and Yum Brands, also reported earnings misses, citing cautious customers and external factors such as the conflict in the Middle East.

Despite persistent inflation, consumer spending has remained resilient. However, with savings from the pandemic drying up, economic growth slowing down, and the perception of inflated prices, companies are scrambling to counteract negative sentiment.

During periods of rapid inflation, companies often test the limits to raise prices. McDonald’s Chief Financial Officer, Kevin Ozan, explained that they are implementing smaller, more frequent price increases as a way to gauge consumer reactions and make adjustments accordingly.

The message is clear: consumers are no longer willing to tolerate price increases.