Food Inflation Hits McDonald’s

From the LA Times
January 24, 2011



McDonald’s just announced the prices they pay for ingrediants will be rising between 2% to 2.5% this year with Technomic estimating they will raise prices across the board between 2.5% and 3%. With this being only the first month of the year, we could see price inflation at all restaurants jump into the double digits by years end.

 

McDonald’s likely to raise prices

Be prepared to pay more for burgers. McDonald’s Corp. is looking to increase the price of some menu items as it tries to deal with the rising cost of beef and other ingredients.
McDonald’s is not alone. The restaurant industry is expected to raise prices in the face of rising commodity costs, and grocery stores began raising prices last year.
The average price McDonald’s pays for its most-used ingredients, such as chicken, wheat and cheese, is expected to go up 2% to 2.5% this year.
“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 Monday.
The Oak Brook, Ill., hamburger chain stressed that any price increases would not be across the board. McDonald’s plans to look at raising the prices of selected items while also keeping in mind that consumers turn to the burger chain for value, particularly as the country emerges from a deep recession.
If McDonald’s, the world’s largest restaurant chain by sales, is mulling over price increases, consumers can expect to see the cost of food going up everywhere. All of the major packaged-food companies, including Kraft Foods Inc. of Northfield, Ill., and Sara Lee Corp. of Downers Grove, Ill., have warned of higher prices in 2011.
“The expectation is we’re going to have higher commodity costs, and restaurants are going to have to pass along some of those,” said Ron Paul, president of Chicago-based Technomic, a restaurant industry consulting firm. “Consumers are already seeing them in grocery stores, so it’s not going to be a surprise.”
Technomic estimates that prices at restaurants will increase across the board this year, by 2.5% to 3%.