Despite MCD's Europe posting another month of strong same-store sales in May (+9.6%), an article in the Financial Times points to difficult times ahead, stating the company is adjusting its one price fits all
pricing structure in an effort to offset rising commodity costs. According to the article, MCD has hired Revenue Management Solutions, an international consultancy group, to survey how price-sensitive its customers are by specific region so that it can more effectively raise prices without facing customer resistance.
Steve Easterbrook, chief executive of McDonald's U.K. business is cited, We do have to move prices up, we can't just absorb [food] price increases. Our food bill has gone up by 5%-6%. MCD's franchisees have had pricing flexibility for a couple of years now, but this is the first time its company-owned restaurants will not have a uniform pricing structure.
With the company forecasting Europe chicken prices to be up 6%-8%, cheese up 20%-25% and beef up 3%-4%, it is not surprising that MCD will have to raise prices but this change in strategy and the implication that consumers can no longer tolerate a blanket menu price increase is another sign that the consumer environment is becoming more challenging in Europe (following the Eurozone Retail Sales report, which showed a 2.9% decline in European retail sales in April and the Experian Group Ltd's statistic which showed that May shopping in Britain had fallen 1.5% from the prior year and 3.4% from April).
pricing structure in an effort to offset rising commodity costs. According to the article, MCD has hired Revenue Management Solutions, an international consultancy group, to survey how price-sensitive its customers are by specific region so that it can more effectively raise prices without facing customer resistance.
Steve Easterbrook, chief executive of McDonald's U.K. business is cited, We do have to move prices up, we can't just absorb [food] price increases. Our food bill has gone up by 5%-6%. MCD's franchisees have had pricing flexibility for a couple of years now, but this is the first time its company-owned restaurants will not have a uniform pricing structure.
With the company forecasting Europe chicken prices to be up 6%-8%, cheese up 20%-25% and beef up 3%-4%, it is not surprising that MCD will have to raise prices but this change in strategy and the implication that consumers can no longer tolerate a blanket menu price increase is another sign that the consumer environment is becoming more challenging in Europe (following the Eurozone Retail Sales report, which showed a 2.9% decline in European retail sales in April and the Experian Group Ltd's statistic which showed that May shopping in Britain had fallen 1.5% from the prior year and 3.4% from April).