Hollis Johnson/Business Insider
McDonald’s just reported sales growth despite raising prices.
Grocery prices are rising faster than fast food prices, according to BLS.
Chipotle saw similar results, with customers unbothered by higher prices.
Inflation is pushing up prices across the economy, but that might actually be good news for fast-food chains.
McDonald’s menu prices are up 8% over where they were this time last year, the chain told investors. Even so, it just reported sales were up 3.5% for the first quarter of 2022 over the previous year, despite data showing that nearly half of consumers plan to reduce spending on dining out because of rising prices. These sales are an increase over 2021 numbers, which surpassed 2019 pre-pandemic levels.
CEO Chris Kempczinski offered a partial explanation for this trend.
“Food at home has been increasing even more than food away from home, so that’s probably been a little benefit to us,” he told investors in the Thursday call.
Consumer Price Index (CPI) data from the Bureau of Labor Statistics bear that out. In March 2022, when McDonald’s first quarter ended, all food was up 10% over March of 2021. Food prices rose 1% from the previous month. In the breakdown of the data, more of that inflation is impacting food at home, which includes grocery store purchases.
Food at home prices rose 10% in the last 12 months, the biggest jump since 1981. Food away from home, including restaurant purchases, also rose by 6.9%.
These relative inflation rates might explain why customers seem unbothered by rising prices at their fast-food chain of choice. McDonald’s prices increases 8% in the last year, but beef prices at the grocery store were up a whopping 16%. In that context, a burger from McDonald’s might look more attractive to the price-conscious shopper.
Skyrocketing grocery prices might also explain why other chains like Chipotle are similarly reporting continued growth, even in the face of price increases across the menu. CFO Jack Hartung told investors on April 26 that Chipotle has seen “very little resistance to the pricing so far.”
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Source:: Business Insider