Practical Dad

Is Inflation Coming?  McDonald’s Says…

Yes.

According to a brief news report, they are.  McDonald's executives, those responsible for more than 32000 restaurants globally and 14000 in the US alone, now acknowledge that rising prices for beef, dairy and other products are squeezing their margins and have updated their own inflation forecast to 4 - 4.5% in the US and Europe alone.  Their problem is in figuring out how can pass the price increases along to a customer base that they also acknowledge to be squeezed, particularly when one of their key demographics is the young male - you know, the guy whose age bracket is presently afflicted with an unemployment rate of more than 18% and the worst in more than 60 years of recordkeeping. 

This is more in keeping with what the PracticalDad Price Index has seen through six months of existence, with ground beef increasing 10% at the retail grocer level and bread products rising about 8%.  The buns - bread products - will be particularly affected by oil prices, but not for the reason that might be suspected.  Apart from the cost of transportation to get everything to the various locations, the baked products all contain some elements of vegetable oils.  These oils are sensitive to oil prices as the biofuel manufacturers use these as an offset to oil, so that more of the vegetable oils are purchased when oil rises.  Dairy costs are being passed along to teh corporation instead of teh consumer however, because milk prices are set at the retail level and cannot be apssed along.  There will come a point however, when the dairy producers scream loud enough about their input costs that the milk board will finally have to pass that along to the retail shopper and that particular product will rise as well.

Other restaurant chains, such as Yum's Chipotle Mexican Restaurant, are likewise seeing their wholesale costs rise but haven't been as successful at controlling them as their peers at McDonald's who apparently differ in that McD's will work hard to keep the prices down.  We'll see.

In the meantime, you might as well supersize while you can still afford it.

 

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