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What is McDonald doing to curb growing costs? Price Increase!

LOS ANGELES – MCDONALD’S Corp plans to raise prices this year to help offset an expected rise in its grocery bill for the 10 commodities that account for around 75 per cent of its food preparation costs.

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Food prices are rising around the globe and the comments from the world’s biggest restaurant chain overshadowed weaker-than-expected December sales at established European and US restaurants, as poor weather hurt demand, and a reported fourth-quarter profit that was in line with expectations.

McDonald’s expects its costs to rise 2 per cent to 2.5 per cent this year in the United States and 3.5 per cent to 4.5 per cent in Europe.

Beef, chicken, pork, bread and milk products, paper, cola, ketchup and other sauces, and fruits and vegetables top McDonald’s US shopping list. Chief Financial Officer Pete Bensen said McDonald’s would ‘raise prices where it makes sense’ to offset some, but not all, of the cost increases. McDonald’s did not give a commodity forecast for Asia and its other markets.

Diners around the world remain cautious with their spending on food away from home and McDonald’s will be very careful not to turn customers off with higher prices, Mr Bensen said.

When asked why costs are going up more in Europe, analysts noted commodity prices fell more in the United States last year than in Europe, a fragmented purchasing market where foreign exchange fluctuations play a big role. — REUTERS

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