McDonald’s likely to hike prices as costs rise

By Emily Bryson York
Posted Jan. 24 at 12:05 p.m.

McDonald’s Corp. will raise prices in the U.S. this year to combat rising commodity costs, the company said in its fourth-quarter earnings call Monday morning.

The Oak Brook-based burger chain estimates that ingredient costs will rise 2 percent to 2.5 percent, with some of those costs passed on to consumers.

“As commodity and other cost pressures become more pronounced as we move throughout the year, we will likely increase prices to offset some, but not necessarily all, of these cost increases,” McDonald’s chief financial officer Pete Bensen said on the call.

He added that “growing traffic and market share has been a key to our success” in recent years, so the company will seek to balance a need for “strong traffic momentum with any strategic pricing moves.”

The company estimates the level of increases its customers can bear by looking at pricing at restaurants and grocery stores, as well as other factors, including inflation. Using this formula, chief operating officer Don Thompson said the company did not raise prices in the U.S. in 2010 because grocery prices increased an average of 0.2 percent, which McDonald’s read as a sign that customers would revolt against higher prices at its restaurants.
So, Bensen said, the company grew same-store sales and operating margins by increasing traffic. Average check amounts declined, however, as the popularity of items such as smoothies and frappes increased the number of single-item sales. This year, McDonald’s plans to build its business through price and traffic increases.

Talk of price hikes came as the company reported its fourth-quarter profit grew 2 percent, to $1.24 billion, as global same-store sales increased 5 percent, including a 4.4 percent increase in the United States. Earnings per share also increased, 5 percent, to $1.16.

“During 2010, we continued our efforts toward becoming our customers’ favorite place and way to eat and drink … and customers rewarded us by visiting our restaurants more often,” McDonald’s CEO Jim Skinner said in a statement. “As a result, we generated strong sales and delivered profitable market share growth.”

For the year, the chain, which serves 62 million customers each day, said same-store sales grew 5 percent, with growth in every segment during each quarter. Net income grew 6 percent, to $22.08 billion.

Full-year results were in line with expectations.

For the company’s performance in the U.S., which continues to outpace that of the restaurant industry, McDonald’s cited chicken nuggets, the McRib sandwich and efforts to build brand loyalty, through the Monopoly promotion, and the caramel mocha, now part of the chain’s McCafe line of beverages.

France and Russia were cited as key growth drivers in Europe, and Japan, Australia and China led the company’s Asia/Pacific, Middle East and Africa region.

The company added that McDonald’s is off to a strong start in 2011, with global same store sales growth expected between 4 percent and 5 percent.

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  1. Blake Jan. 24 at 10:39 a.m.

    It’s impressive how much McDonald’s has picked up global popularity. Hopefully they don’t get the bad reputation they have in the US. They just have to avoid the mistakes they did here and serve healthier items. They don’t want any global lawsuits.

  2. Rebecca Jan. 24 at 1:12 pm

    So what McDonald’s is really saying is that their shareholders just aren’t rich enough. Gosh, $1.24 billion in profit is chump change. “So all you people hit hardest by the recession….give us more money. The Chairman of the Board needs a private island!”

  3. bigdog0319 Jan. 24 at 1:13 pm


  4. BURGER KING Jan. 24 at 1:14 pm

    We are all in hard times, when I go to your place I have to wait in line!You will lose more that you asking for. Have your way!!

  5. joe1 Jan. 24 at 1:16 pm

    Its all about the stock options for DaBoyz.. Nothing else

  6. Brian Jan. 24 at 1:23 pm

    >“So all you people hit hardest by the recession….give us more money…”<

    Easy solution… don't go!

  7. ethan Jan. 24 at 1:27 pm

    If your 401K incudes shares of the Arches (and it most likely does), then you WANT share values to rise. If you want retail prices to stabilize, tell the courts to throw out frivilous lawsuits filed against McDonald’s for failing to keep our kids “healthy”.

  8. Chicago Nick Jan. 24 at 1:29 pm

    Stop eating all this fast to your grave food America before it claims your lives

  9. Fed-Up Jan. 24 at 1:31 pm

    Blame the unions, they are at fault like the rest of America. Has nothing to do with these fat cat corporate executives that are raking in millions and millions of dollars. Guess they can’t sacrifice some of there salaried money so the average Joe can afford a stupid burger. Haven’t been to a fast food chain in along time and here’s the reason. Corporate Executives are like are Politicians, they should be considered the MOB.

  10. lasttime Jan. 24 at 1:38 pm

    If the next Monopoly game promotes false advertising like the last one did (1 in 4 wins), McDonalds will find itself in a huge lawsuit. I spent $12 and purchased eight products, and did not win a dang thing–and I made McDonalds aware of their LIE!!

    Better do better if you have another Monopoly game, Big Mac, or you are in for big time trouble!

  11. ejhickey Jan. 24 at 1:42 pm

    Other food providers have been doing the same thing except they have been less honest about it. Many food and grocery providers have been reducing the size of the packages but keeping the prices the same. Example :Orange Juice – the size of the container was reduced from 64 oz to 59 oz but the price stayed the same. therefore , when you buy orange juice , realize that you are getting less for the same price.

    Even if you do not like McD’s food , at least they were honest about the price increase ad did not try to sneak it past the customers. If you don’t like McD’s , use this as an opportunity to start preparing your own food at home.

  12. JohnnyS Jan. 24 at 1:44 pm

    Poor Rebecca, don’t go if you can’t afford it. And it IS a business. A business is in business to, get this, make money.

    And I believe it’s one-in-six Americans have been employed at McD’s. That’s a lot of jobs.

    Wake up.

  13. Super Size Me Jan. 24 at 1:46 pm

    “During 2010, we continued our efforts toward becoming our customers’ favorite place and way to eat and drink … and customers rewarded us by visiting our restaurants more often,” McDonald’s CEO Jim Skinner said in a statement.

    And now McD’s will be rewarding their customers with higher prices.

    Very nice McD’s…lets see which company your (former) customers reward this year.

  14. McPukes Jan. 24 at 1:48 pm

    just b/c the odds are 1 in 4 doesn’t mean the 8 products you bought will produce 2 winners.

  15. capitalist pig Jan. 24 at 1:50 pm

    In response to rebecca 1.24 bil profit sounds like alot until you realize that they had to do 22.08 bil worth of work to get that. Only a 5% return. Their profits are not obscene by any means.

  16. LeevMyNameOut Jan. 24 at 1:50 pm

    Is “lasttime” an idiot?

  17. Inflation Jan. 24 at 1:59 pm

    The title of this article should read, “Due to fed’s recent unprecedented inflationary actions Mcdonalds prices are rising rapidly.”

    Mcdonalds food will not be the only thing that goes up in price this year.

    Rapid inflation destroys savings, makes every dollar in your pocket worth less, and rewards debtors. Luckily for the federal government, being the largest debtor in the world does have its advantages in such an environment.

  18. freakyweirdo Jan. 24 at 2:00 pm

    Why is it McDonalds is marketing to the black community? In every commercial it’s only black people. Next time there is a McDonalds commercial, check it out.

  19. Steve Fisher Jan. 24 at 2:01 pm

    I love that fake vanilla ice cream cone! And that ice coffee will clean you out!

  20. RB Jan. 24 at 2:03 pm

    Stop eating there.

  21. Riquin Jan. 24 at 2:06 pm

    I can not understand this price hike. According to our maximun leader there is no inflation ?????

  22. 007 Jan. 24 at 2:09 pm

    And if they didn’t, freakyweirdo, you’d be complaining that McDonald’s isn’t recognizing America’s diversity by doing only lilly-white commercials….

  23. JT Jan. 24 at 2:15 pm

    Since they are based in IL, could the price increases also be from the obscene tax hike Illinois passed on residents and businesses?

  24. John Jan. 24 at 2:15 pm

    I only go there for the $1.00 meals and $1.00 coffee. I they go up, I go out.
    Sorry Mac. your hamburgers are not worth the money you want for them.

  25. Ginny Jan. 24 at 2:16 pm

    I’m sure all the increases will be passed to the consumer! We wouldn’t want Mc to collapse. They really don’t make enough money already?

  26. DadR Jan. 24 at 2:19 pm

    Sorry, Mickey D, but the U.S Government says that the cost of living has NOT increased and, therefore, I won’t be getting a Social Security increase. If I don’t get a raise neither do you. Take your burgers and shove them.

  27. grampatc Jan. 24 at 2:22 pm

    McDonalds has had for almost a year a commerical on TV and in print bragging about their DOLLAR MENU items including the McDouble and the McChicken sandwiches. No McDonalds within 5 Miles of Des Plaines Illinois (where #1 is located) has had the McChicken on the Dollar Menu for almost 2 years. I tell my Grandchildren I will not buy the McChicken for them because of McDonalds false advertersing.

  28. Mike Coop Jan. 24 at 2:22 pm

    i cant believe people still eat this ****

  29. steve Jan. 24 at 2:31 pm

    Fine, then when my food gets to me cold, I’m giving it back until I get it hot.

  30. Mikey Bottoms Jan. 24 at 2:46 pm

    With less money to spend in your paycheck here in IL, more people will be going to cheap fast food. McDonald’s will only thrive in this state.

  31. Tim Jan. 24 at 2:49 pm

    Isn’t McDonald’s doing well enough?

  32. Marion Mims Jan. 24 at 2:58 pm

    This brings to mind back in the seventies when John DeButts the C.E.O.
    of A.T.&T., the parent company of what was then the Bell Telephone System
    stated that the billions of dollars of profits that they had earned was
    “impresive, but not enough”. How much money does it take to impress the
    stockholders and to guarantee bonuses to those at the corporate top.
    If you are going to raise your prices then provide your customers with a
    quality product and friendly and civil customer service.

  33. brad Jan. 24 at 3:24 pm

    Rising gas prices probably have to do with a lot of this. Everything started going to crud when oil and gas costs went up so much.

  34. Chicago Dem Jan. 24 at 5:41 pm

    How come McDonald’s just doesn’t give away food for free? I know I would.

  35. Bob Johnson Jan. 24 at 6:18 pm

    This is JUST the way our illustrious American corporations “help us out”. As millions scrape the bottom of the barrel and are forced to eat these McRoadkill, McPolyester fries, imitation McBuggets, and drink synthetic milkshakes, we can always count of McDonalds and their sister fast food garbage eateries to put those same struggling people OVER the barrel and give them a good reaming. That’s why our despicable American corporate executives there all all “Lovin’ It”, it can’t be the new McRat sandwich they’ve reported record sales on.

  36. Jackson Jan. 24 at 9:20 pm

    Wow – so many of you are so ignorant! If you bother to read the annual reports (assuming you can actually read), you’ll note what the executives make. Honestly – they are underpaid for a multi-billion dollar organization!

    If you don’t like the food – don’t eat there. They are in business to make money and employ millions of people! The shareholders want returns. If you want to blame someone, blame the stock analysts who decry there isn’t enough profit when net margins increase 3% year over year and comp sales are +5%. Those jokers don’t get it. Clearly neither do most of you.