For cheap fast-food, McDonald’s Canada wants Canadian consumers to look to the golden arches.
On Tuesday, McDonald’s Canada announced that, for at least a year, it will freeze the price of a small cup of coffee at $1 and drop the price of its McValue menu from $6 to $5. The move comes as growing financial constraints on consumers have put even cheap food options out of reach.
“Together with our local franchisees, who own and operate 90 per cent of all McDonald’s Canada restaurants, we’re leveraging the size and strength of our Canadian supply chain to keep prices low on McValue Meals and coffee, despite inflation and rising costs, to deliver the dependable value our guests expect from us,” said the company’s new CEO Annemarie Switjink, in a press release.
The company notes the items on the McValue menu will remain the same, including the portion sizes.
With the rising cost of living and the constant fear of tariffs from the US, the move may offer some certainty for Canadians in a volatile economy.
“Today, we make a commitment to Canadians: no matter the time of day, every day of the year, you can count on McDonald’s for delicious food at a great price,” said Swijtink in the press release.
While the pricing scheme may make for slimmer margins for the fast-food chain, it’s a gambit that retail experts say could drive extra sales and, ultimately, profits.
“The profitability of a promotion like this isn’t restricted solely to looking at the profitability of the specific item that’s being focused on,” says David Soberman, a marketing professor at the University of Toronto’s Rotman School of Management. “You come in and you might be buying meals for kids when you go into McDonald’s, which are perhaps more profitable than the value meals.”
Retail analyst Bruce Winder says that the move could be an attempt to change perception of McDonald’s prices, generating a “halo effect” for the restaurant chain that translates into customer loyalty.
“It shows a good faith gesture by McDonald’s,” says Winder. “Quick-serve restaurant meals have have went up quite a bit over the last five years since the pandemic.”
Winder notes that despite the increasing cost of the beans, a cup of coffee is still a fairly high margin — and high volume — product.
According to Swijtink, McDonald’s Canada can “find savings” from its high-volume dealings with farmers and suppliers with whom they’ve had long-standing relationships.
Soberman says it’s likely that a big company like McDonald’s already has pricing agreements with suppliers that are as favourable as possible without putting the farmers out of business.
Leveraging its already considerable industry power, he says, could be an attempt to lure customers from competitors.
“Let’s say in a certain city, you have a 15 per cent or a 16 per cent market share, and you’re able to increase that to 17 per cent or 18 per cent,” he says. “The difference that makes in terms of the profitability of your franchises is extremely significant.”
But McDonald’s isn’t the only fast-food chain attempting to offer more affordable options to their customers. Both Tim Hortons and Wendy’s have sold meal deals in Canada in recent months while Burger King has a budget-friendly menu similar to that of McDonald’s.
Rising costs of ground beef due to reduced cattle herds is one factor that may be driving the price of fast food everywhere.
“If you’re that consumer, you’re driving up to the restaurant and you’re seeing combo meals could be priced over $10 and that absolutely is shaping value perceptions and shaping value perceptions in a negative way,” global CEO Christopher Kempczinski said on an August earnings call.
“We’ve got to get that fixed.”
With files from the Canadian Press
