After years of dealing with high inflation, Americans got some good news this summer when the country’s most-loved fast food chain launched a $5 combo that set off a deal war .
While this was welcome news for many, the McDonald’s President Joe Erlinger recently had to defend the deal.
“The consumer right now certainly needs great value and affordability and that’s why McDonald's is with the consumer with this $5 meal deal,” he said in a conversation with Kate Linebaugh during the Wall Street Journal’s Global Food Forum . He also noted that the attendees gathered at the Four Seasons hotel for the meeting didn’t really represent McDonald’s consumer population.
According to Axios , “local food advocate Alice Waters criticized McDonald’s $5 meal campaign for the toll that cheap food takes on workers, animals and the environment,” at the conference the day before Erlinger’s talk with Linebaugh. Waters was previously awarded with a National Humanities Medal by former President Barack Obama for her work as a food activist.
In a 2015 interview with Time magazine , Waters called McDonald’s decision to use cage free eggs a “gimmick” and said that the definition for such as is vague. Erlinger also highlighted the use of fresh cracked cage free eggs at McDonald’s during his recent interview.
He explained that the company tends to prioritize initiatives that work well. That includes the $5 deal.
“It was actually the idea of a group of franchisees. They’ve been running a similar promotion in upstate New York for over a year at this point, and they’ve seen great success in building their business,” he explained. “And at McDonald’s, when you have good things happen, they tend to spread around the country. And so that’s exactly what’s happened in this and it’s become a national promotion.”
An example of something that didn’t work out well for the chain was the McPlant plant-based burger. This item wasn’t a success in either of two markets where it was tested – San Francisco, Calif., and Dallas, Texas.
“I don’t think the US consumer is coming to McDonald’s or looking for a McPlant or other plant-based proteins from McDonald’s now,” said Erlinger. “They’re looking for great french fries. They’re looking for a $5 meal deal. They’re looking for a hot, fresh sandwich. And so that’s what we’re going to continue to provide them.”
When Linebaugh asked Erlinger if the deal is a loss leader, he answered with what might come as a surprise to some.
“It is not a loss leader. We are totally comfortable with the profitability of it,” he said. “Our franchisees are comfortable with the profitability of it. It’s a way to really bring value and affordability to our customers at a time when the consumer is really stretched and is feeling, I think, the stress of several years of inflation. And so this is our opportunity to give customers what they really need at this time.”
According to an expert cited by MarketWatch , Erlinger’s words are true. Mark Kalinowski, a veteran fast-food-industry analyst, estimated there’s a 1% to 5% profit margin on the combo. That’s equal to roughly $.05 to $.25 per meal.
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