- McDonald’s diners are adding fewer items to their orders, and some markets are pushing back against price increases.
- Still, the fast-food giant reported its third consecutive quarter of U.S. traffic growth in the first quarter.
- Companies like PepsiCo and Coca-Cola are reporting mixed reactions to higher prices during the first quarter.
McDonald’s customers are pushing back against higher prices in some markets and adding fewer menu items to their orders, CEO Chris Kempczinski said Tuesday.
Shares of McDonald’s fell slightly Tuesday, but the stock hit a new 52-week high. McDonald’s is up about 10% so far this year.
Kempczinski’s comments come as consumer companies report mixed reactions to higher prices during the first quarter. For example, Coca-Cola saw a muted reaction to demand as it kept raising prices on its drinks. Rival PepsiCo, on the other hand, said in February it won’t hike prices further but reported a 2% decline in its first-quarter volume, which excludes price or currency changes.
For roughly a year, companies have been raising prices to mitigate inflation, particularly after Russia’s invasion of Ukraine sent commodity prices soaring. But consumers’ spending habits are changing in response, too, even as inflation cools. Coca-Cola CEO James Quincey said Monday on the company’s conference call that inflation and higher mortgage rates are top of mind for many consumers, despite low unemployment and improvements in gas prices.
Kempczinski said that consumers’ resistance to higher prices has come from going “off script” from the models it uses to determine its pricing strategy.
“When we execute where we know we have pricing power, we do quite well, but what we do find as we try to take pricing in the areas that are maybe a little bit more sensitive, the consumer pushes back on it,” he said on CNBC’s “Squawk on the Street.”
Additionally, Kempczinski said diners are less likely to add extras like French fries to their orders. Items per transaction have fallen by the low single-digits, he said.
But consumers are largely still buying Big Macs and McNuggets. The fast-food giant reported its third consecutive quarter of U.S. traffic growth, and it’s gaining market share across all income brackets.
Additionally, McDonald’s topped Wall Street’s estimates for its first-quarter earnings and revenue, helped both by its higher prices and increased demand.
Watch the full interview with McDonald’s CEO Chris Kempczinski on CNBC Pro:
Source: Business - cnbc.com
