After years of slumping sales, McDonald’s has rolled out a 10-year plan to offer healthier menu items and tweak existing recipes so they contain quality ingredients.
According to The Motley Fool, the Golden Arches will soon serve only cage-free eggs and source chicken raised without antibiotics. These changes reflect Americans’ changing attitudes on what they eat; a 2015 Nielsen Global Health and Wellness Report found 43 percent of people consider all-natural and GMO-free food very important.
But with these more expensive additions comes a serious drawback for loyal customers — higher prices.
McDonald’s chief financial officer Kevin Ozan said he’s not worried about a potential price hike. According to him, there are two types of price-sensitive customer — value seeker and deal seeker. Value seekers “look for kind of an entry-level price point value and want to make sure they’re getting a deal,” while deal seekers “go around and look for the best deal around.” Deal seekers want a certain quality at the lowest price, while value seekers simply want their meals to be as cheap as possible.
“We’ve got to be able to attract both of those customers in order to grow,” Ozan said.
But, as The Motley Fool’s Michael Schramm points out, McDonald’s should be worried about how increasing menu prices will impact competitors.
For example, Wendy’s currently has similar prices to McDonald’s. But rising costs at the world’s largest restaurant chain could drive hungry bargain seekers straight to different eateries.
According to Schramm:
“If McDonald’s wants to stay competitive, it can’t charge similar or lower prices than Wendy’s and give up its position as the low-cost option. Instead, if it really wants to target two customer bases, the company needs to create menu options that have health-conscious consumers pay for higher quality foods and reduce prices of lower-quality options for the other base.”
It will be interesting to see whether all these changes, done in the name of health, hurt McDonald’s bottom line in the long run.
(H/T: The Motley Fool)