McDonald’s to cut prices as fast food consumption falls to all-time lows

02/25/2017 / By Vicki Batts

McDonald’s is feeling the burn as fewer people choose to dine out, and more people choose to cook at home. The novelty of their all-day breakfast appears to have worn off, as sales and growth have begun to dwindle once again. Now, the fast food giant has turned to something new to help reel customers back in: cutting the prices of drinks.

After last year’s focus on burgers and chicken sandwiches, McDonald’s plans to advertise $1 sodas and $2 McCafe specialty drinks in the hopes of regaining their following across the United States. Bloomberg reports,”McDonald’s leads a $228 billion U.S. fast-food industry that faces slackening growth. After increasing 2.4 percent last year, revenue gains will slow to 1.5 percent this year and 1.6 percent in 2018, data from researcher IBISWorld show.”

Restaurant industry takes a hit while Americans dine at home

The gap between restaurant prices and grocery costs is at an all-time high right now, which has been prompting many people to choose to eat at home, rather than going out. McDonald’s is not the only restaurant in the industry being hit hard by this change. Reports indicate that almost a third of US adults say that they are eating out less frequently than they did just three months ago, mostly due to the sheer cost.

Traffic to restaurants has been dismal since 2009, remaining flat or up by just one percent in recent years. A poll by Reuters/Ipsos revealed that 62 percent of respondents said cost was the primary reason for choosing not to go out to eat. And it’s no surprise: estimates suggest that the consumer price index for food away from home was up by 2.4 percent. Conversely, the cost of eating at home has dropped by about 1.9 percent. And apparently, people are noticing the disparity.

Reports also indicate that people in their 20s and 30s are more likely to dine at “fast-casual” restaurants such as Chipotle or Panera Bread. Julie Jargon, of The Wall Street Journal, wrote, “Increasingly, younger diners are seeking out fresher, healthier food and chains that offer customizable menu options for little more than the price of a combo meal.” Millenials have become the biggest threat to chains like McDonald’s; they’re looking for healthier options, and the price difference isn’t all that much.

Even back in 2014, McDonald’s efforts to engage the 20-to-30 age group fell flat.

Healthy eating trend continues to grow

Retail expert Robin Lewis explains that McDonald’s isn’t the only brand to be affected by strong disinterest from younger age groups. Lewis says that young people are tired of the constant marketing and advertisements that are thrown at them by iconic brands — and are more interested in smaller, more simple marketplaces.

To put it simply, McDonald’s is going to have to work very hard to convince young people their food is healthy if they want to recoup their sales. The fast food giant has already advertised removing antibiotics from their chicken, but it doesn’t seem to be convincing enough. The trend of healthy eating has gotten a strong following, especially among young people, and it only continues to gather steam.

A 2015 survey of more than 30,000 people revealed that younger people are becoming more concerned about the ingredients in their food, genetically modified foods, and organics than previous generations. More than 40 percent of the under-20 age group, and 32 percent of people in their 20s and 30s, reported that they would be willing to spend more money on healthier food options. Conversely, just 21 percent of baby boomers would be willing to pay more for higher quality food.

The amount of soda being consumed in the United States has also been on a steady decline for the last few years. In March 2016, Business Insider reported that soda consumption had dropped by 1.2 percent in the preceding year. And in 2014, sales had already dropped by 0.9 percent. In total, American soda consumption dropped by 1.5 billion cases in 2015, when compared to the peak volume of 2004. This is great news, especially given the harmful effects of sugar and high-fructose corn syrup.

While the trend of healthy eating isn’t great for the fast food and beverage industries, it is good for people.

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Tagged Under: fast food, healthy eating, McDonald's