Fast food giant McDonald's is well aware of the melting pot of issues its customers are facing. From inflation to hikes in base rates, through to wider economic and geopolitical uncertainty, it's understandable many households are stripping back their spending.
But for the Chicago-based restaurant chain such headwinds create an "opportunity," its CEO said, adding the business has released a raft of items to ensure it stays relevant to the emerging, cost-conscious consumer.
Speaking during the McDonald's Q3 2023 earnings call, CEO Chris Kempczinski said "it's clear that consumers continue to be more discriminating about what and where they spend."
However, Kempczinski continued "in difficult economic times [for consumers], the McDonald's brand and our positioning on value is an opportunity for us."
The CEO outlined the business wouldn't accept being dropped out of rotation by customers for regular visits. So instead of pulling levers within the business to protect the bottom line, McDonald's rolled out smaller, affordable meal options to keep customers coming back—despite a limited budget.
"McDonald's is one of those consumer brands that has the permission and power to be part of people's everyday lives," Kempczinski said. "And one of the great things about McDonald's is that we don't rest on our laurels. We continue to find new ways to earn customer visits."
Rollouts have included affordable "bundles" in Europe—a popular offering in the U.S.—as well as breakfast deals in Canada, and promotions around lower-priced item pairings in China.
According to McDonald's CFO, Ian Borden, it's working—revealing global comp sales are up 9% for the quarter.
However the business is experiencing the same problems flagged in recent weeks by Wall Street—that consumers at the lowest end of the income ladder are beginning to back off.
Citigroup CEO Jane Fraser described this as "cracks" emerging on the lower end of the spectrum. For McDonald's that means traffic from consumers earning less than $45,000 "dipped" for the quarter.
Kempczinski said the brand would continue to monitor the $45,000 and under cohort to ensure it was "offering value."
A planned price hike?
With such focus put on affordability, analysts on the call on Oct. 30 pushed for answers on whether McDonald's is planning any further price hikes this year.
Executives had previously said they expect pricing to be up approximately 10% in the U.S. for 2023, but added on the call this week that the rate of those increases will begin to drop off in line with inflation.
Inflation hit a decade-long high in June 2022 at 9.1%, spurring the Fed into action with hikes bringing the rate to a 22-year high.
So far price increases have generally been accepted by consumers, Kempczinski said, highlighting he believes this is the case because "we've tried to be very choiceful and disciplined on how we have executed those price increases."
Neither Borden or Kempczinski ruled out the possibility of price hikes happening even as soon as Q4, instead saying they're focussed on the "moderation" of such increases.
McDonald’s did not immediately respond to Fortune’s request for comment.
The weight loss question
Unlike other food and beverage brands, McDonald's seems unfazed by the emergence of weight loss drugs such as Ozempic and Wegovy, otherwise known as GLP-1s.
Nestle has announced it is launching a raft of GLP-1 supporting products while Walmart said it is seeing changes to consumer purchasing patterns.
Meanwhile both PepsiCo and Coca-Cola have said they are monitoring the situation with the new trend, though don't expect to see any major upset in the industry.
McDonald's, America's biggest fast food chain, seems similarly unbothered. In fact, unlike other brands, it didn't even mention the issue at all.
