Are fast food chains like Macca’s about to increase their prices?
- Replies 3
Eating is one of life’s greatest pleasures, and there are a few things that measure up to having a meal at your favourite restaurant or fast food outlet.
But Aussie fast food lovers may be in for a shock, because there could soon be some major changes on the way.
The cost of living crisis in Australia has seen inflation rise to its highest level in decades, and this has sparked a warning from finance guru Chris Kohler that fast food giants like McDonald's could have a number of ways to adjust to the increased financial pressure — with none of them pleasing to consumers.
‘Macca’s and pretty much all fast-food businesses have a big problem on their hands,’ Kohler began in a TikTok post.
‘Let’s say, for argument’s sake, that they’re buying their ingredients at retail prices — which they’re not,’ he said.
He then reveals that over the last year, various fast food staples have risen considerably.
Cheese and bread had a whopping 14 and 13 per cent increase in their respective prices, while beef and vegetables increased by 8 per cent.
Pork, meanwhile, had a five per cent price increase in the last 12 months.
‘They have all skyrocketed,’ he stressed. ‘That leaves a Macca’s or a Hungry Jack’s with a number of options, and none of them are any good.’
So members, what does this mean for you? Apparently, these are the six possible options on the table for McDonald’s and its competitors:
Take a profit hit
McDonald’s and other outlets could take a hit to their profits. This would look better on the surface, but it’s likely to be viewed unfavourably by the shareholders — so this is a tough sell, according to Kohler.
Besides, remember when a report found that an uptick in corporate profits was found to contribute to Australia’s record-high inflation rates?
In other words, tough luck for customers.
Reduce burger sizes, a.k.a Shrinkflation
‘Option number two, you shrink the size of your burgers,’ Kohler said.
‘It’s called “shrinkflation”, a lot of companies do it and you don’t even notice.’
Shrinkflation is the response of businesses to rising costs of goods, maintaining operational costs, and making a profit.
As Kohler also explained last year, businesses are afraid they’ll lose out if they opt for price hikes, which leads to the compromise of maintaining product cost but at the expense of product size.
'It's hard to get angry at the companies themselves for this because the price of raw commodities that go into food has been going up with everything else as inflation does,’ he said in November.
'Wheat, dairy, cocoa, it's all been going up, and the companies have a choice: do we jack up the price or do we make the items smaller?’
‘Some have both been getting smaller and been going up in price.'
Many Aussies previously took to social media to share their observations of this, with many disappointed at how people were ending up getting less despite paying the same amount of money.
Products that were said to have ‘shrinkflated’ include Tim Tams, Pringles — and yes, Macca’s burgers.
Source: TiKTok/@chriskohlernews
Switch to cheaper ingredients
Next, Kohler put forth a different form of cost-cutting for fast-food businesses.
‘(They) change the ingredients to cheaper options,’ he said. ‘It is awkward if you get caught doing this, of course.’
Aussies saw something similar last year when fast-food outlets like KFC and Subway changed their usual burger and sandwich recipes to include a bit of cabbage with lettuce instead of just lettuce.
These changes were announced publicly, but it doesn’t take away the fact that the change was due to the high cost of lettuce at the time — which at one point even reached $12 a head. (Honourable mention to Lettuce Vuittons, which were the rage last year).
With fast-food ingredients posting price increases, it wouldn’t be surprising if Aussies see something similar soon.
Pressure suppliers
Another thing Kohloer says businesses like McDonald’s could do is to put pressure on suppliers to take a profit hit instead.
If this sounds familiar, it’s because it is. In October of last year, supermarket giant Coles told suppliers to adjust to the high prices of goods by cutting operational costs instead of requesting an increase in prices.
‘Even where you can substantiate increases to cost of doing business including rising cost of inputs,’ they told suppliers, ‘Coles may not accept your request for a cost increase in full or at all.’
‘Coles must balance customer needs, Coles value proposition and the competitive environment. Your organisation needs to be continually reviewing how you operate to offset costs.’
It should be noted though that in response, NSW Farmers Vice President Rebecca Reardon criticised Coles as businesses on the supply side ‘had nothing left to give’ especially with massive flooding hitting Australia.
‘Coles made more than $1 billion in net profit after tax last financial year, yet the farmers fighting floods to harvest food and make ends meet are somehow the ones who should be cutting costs,’ Reardon said.
‘Farmers simply cannot afford to take a pay cut, there’s just no margin left, and this sort of behaviour will simply drive farmers out of business and further constrain food supply.’
Increase prices
The fifth option is perhaps the most obvious one from a consumer standpoint.
‘(Fast-food businesses) jack up the price,’ as Kohler phrased it.
This is an unappealing prospect for customers and could mean that fewer people can afford to eat at fast food outlets due to the high cost of goods being passed down from the supply chain as well as rising expenses outside of food.
If that is the case, maybe it’s time to consider home-cooked meals.
‘It’s going to be interesting to see what Macca’s and all other fast food companies do this year because they’re going to have to do something,’ he continued.
And what would that be, Mr Kohler?
‘It might be option six, where (they) do a little bit of everything.’
And here we were hoping 2023 would be better than last year… (Half) Kidding!
Kohler’s post has been viewed over 300,000 times on TikTok, and naturally, many had their thoughts on his, well, thoughts.
Many seemed to have taken a bit of offence when he said shrinkflation was something that went unnoticed among Aussies, and a lot had it out for Macca’s.
Most tellingly, the top comment read: ‘Macca’s have already shrunk their burgers. If they were any smaller they would be called sliders.’
‘The Big Mac needs to be renamed,’ another added. ‘Macca’s have shrunk their burgers 10x already.’
A third added: ‘Look at the price of a McChicken meal already — $12.20 for a medium! The price hike has already been built-in… not to say there won’t be more.’
Another one took aim at KFC, which they claim has taken lettuce off their Twisters.
‘Sometimes you get a little lettuce, but most times it’s just carrot,’ they said.
Others shared ways they thought they could stick it to big businesses.
‘Boycott them for a few weeks, then see what happens.’ one user said.
‘(Taking a profit hit) sounds pretty good, to be honest. I’m sure the CEO of Macca’s doesn’t need a third yacht,’ another added.
While a third issued a rather stern warning: ‘Ripping off consumers will end poorly for you.’
If it’s any consolation though, there are some experts who believe that food inflation will stabilise this year due to falling prices of commodities like vegetable oils, grain, and wheat, as well as consumers reining in their spending, especially after the Christmas holiday.
On that note, if you have time, you might be asking: ‘What can I do to have a better grip on my budget in the meantime?’ Read this article to find out!
So, members — what do you think of the situation? Are you concerned after reading about what could possibly be in store for Aussies this year, at least in terms of fast food?
We’d love to hear your thoughts in the comments below!
Source: TikTok/@chriskohlernews
But Aussie fast food lovers may be in for a shock, because there could soon be some major changes on the way.
The cost of living crisis in Australia has seen inflation rise to its highest level in decades, and this has sparked a warning from finance guru Chris Kohler that fast food giants like McDonald's could have a number of ways to adjust to the increased financial pressure — with none of them pleasing to consumers.
‘Macca’s and pretty much all fast-food businesses have a big problem on their hands,’ Kohler began in a TikTok post.
‘Let’s say, for argument’s sake, that they’re buying their ingredients at retail prices — which they’re not,’ he said.
He then reveals that over the last year, various fast food staples have risen considerably.
Finance guru Chris Kohler pointed out that fast-food ingredients have seen price increases over the year, which may prompt adjustments from businesses. Image Credit: Seniors Discount Club
Cheese and bread had a whopping 14 and 13 per cent increase in their respective prices, while beef and vegetables increased by 8 per cent.
Pork, meanwhile, had a five per cent price increase in the last 12 months.
‘They have all skyrocketed,’ he stressed. ‘That leaves a Macca’s or a Hungry Jack’s with a number of options, and none of them are any good.’
So members, what does this mean for you? Apparently, these are the six possible options on the table for McDonald’s and its competitors:
Take a profit hit
McDonald’s and other outlets could take a hit to their profits. This would look better on the surface, but it’s likely to be viewed unfavourably by the shareholders — so this is a tough sell, according to Kohler.
Besides, remember when a report found that an uptick in corporate profits was found to contribute to Australia’s record-high inflation rates?
In other words, tough luck for customers.
Reduce burger sizes, a.k.a Shrinkflation
‘Option number two, you shrink the size of your burgers,’ Kohler said.
‘It’s called “shrinkflation”, a lot of companies do it and you don’t even notice.’
Shrinkflation is the response of businesses to rising costs of goods, maintaining operational costs, and making a profit.
As Kohler also explained last year, businesses are afraid they’ll lose out if they opt for price hikes, which leads to the compromise of maintaining product cost but at the expense of product size.
'It's hard to get angry at the companies themselves for this because the price of raw commodities that go into food has been going up with everything else as inflation does,’ he said in November.
'Wheat, dairy, cocoa, it's all been going up, and the companies have a choice: do we jack up the price or do we make the items smaller?’
‘Some have both been getting smaller and been going up in price.'
Many Aussies previously took to social media to share their observations of this, with many disappointed at how people were ending up getting less despite paying the same amount of money.
Products that were said to have ‘shrinkflated’ include Tim Tams, Pringles — and yes, Macca’s burgers.
Source: TiKTok/@chriskohlernews
Switch to cheaper ingredients
Next, Kohler put forth a different form of cost-cutting for fast-food businesses.
‘(They) change the ingredients to cheaper options,’ he said. ‘It is awkward if you get caught doing this, of course.’
Aussies saw something similar last year when fast-food outlets like KFC and Subway changed their usual burger and sandwich recipes to include a bit of cabbage with lettuce instead of just lettuce.
These changes were announced publicly, but it doesn’t take away the fact that the change was due to the high cost of lettuce at the time — which at one point even reached $12 a head. (Honourable mention to Lettuce Vuittons, which were the rage last year).
With fast-food ingredients posting price increases, it wouldn’t be surprising if Aussies see something similar soon.
Pressure suppliers
Another thing Kohloer says businesses like McDonald’s could do is to put pressure on suppliers to take a profit hit instead.
If this sounds familiar, it’s because it is. In October of last year, supermarket giant Coles told suppliers to adjust to the high prices of goods by cutting operational costs instead of requesting an increase in prices.
‘Even where you can substantiate increases to cost of doing business including rising cost of inputs,’ they told suppliers, ‘Coles may not accept your request for a cost increase in full or at all.’
‘Coles must balance customer needs, Coles value proposition and the competitive environment. Your organisation needs to be continually reviewing how you operate to offset costs.’
It should be noted though that in response, NSW Farmers Vice President Rebecca Reardon criticised Coles as businesses on the supply side ‘had nothing left to give’ especially with massive flooding hitting Australia.
‘Coles made more than $1 billion in net profit after tax last financial year, yet the farmers fighting floods to harvest food and make ends meet are somehow the ones who should be cutting costs,’ Reardon said.
‘Farmers simply cannot afford to take a pay cut, there’s just no margin left, and this sort of behaviour will simply drive farmers out of business and further constrain food supply.’
Increase prices
The fifth option is perhaps the most obvious one from a consumer standpoint.
‘(Fast-food businesses) jack up the price,’ as Kohler phrased it.
This is an unappealing prospect for customers and could mean that fewer people can afford to eat at fast food outlets due to the high cost of goods being passed down from the supply chain as well as rising expenses outside of food.
If that is the case, maybe it’s time to consider home-cooked meals.
‘It’s going to be interesting to see what Macca’s and all other fast food companies do this year because they’re going to have to do something,’ he continued.
And what would that be, Mr Kohler?
Many Aussies have noted that meals at their preferred fast-food joints have shrunk over the years due to shrinkflation. Image Credit: Unsplash/jonathanborba
‘It might be option six, where (they) do a little bit of everything.’
And here we were hoping 2023 would be better than last year… (Half) Kidding!
Kohler’s post has been viewed over 300,000 times on TikTok, and naturally, many had their thoughts on his, well, thoughts.
Many seemed to have taken a bit of offence when he said shrinkflation was something that went unnoticed among Aussies, and a lot had it out for Macca’s.
Most tellingly, the top comment read: ‘Macca’s have already shrunk their burgers. If they were any smaller they would be called sliders.’
‘The Big Mac needs to be renamed,’ another added. ‘Macca’s have shrunk their burgers 10x already.’
A third added: ‘Look at the price of a McChicken meal already — $12.20 for a medium! The price hike has already been built-in… not to say there won’t be more.’
Another one took aim at KFC, which they claim has taken lettuce off their Twisters.
‘Sometimes you get a little lettuce, but most times it’s just carrot,’ they said.
‘Boycott them for a few weeks, then see what happens.’ one user said.
‘(Taking a profit hit) sounds pretty good, to be honest. I’m sure the CEO of Macca’s doesn’t need a third yacht,’ another added.
While a third issued a rather stern warning: ‘Ripping off consumers will end poorly for you.’
If it’s any consolation though, there are some experts who believe that food inflation will stabilise this year due to falling prices of commodities like vegetable oils, grain, and wheat, as well as consumers reining in their spending, especially after the Christmas holiday.
On that note, if you have time, you might be asking: ‘What can I do to have a better grip on my budget in the meantime?’ Read this article to find out!
So, members — what do you think of the situation? Are you concerned after reading about what could possibly be in store for Aussies this year, at least in terms of fast food?
We’d love to hear your thoughts in the comments below!
Source: TikTok/@chriskohlernews
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