A strategy employed to increase sales and profits, McDonald's and KFC announced it will be scaling back on some of its under "value" items by $5 in favour of more expensive $10-to-$30 combination meals. The celebrity collaborations with BTS and Travis Scott turned out to be a lucrative brand endorsement for the fast-food giant. The BTS collaboration alone drew in hordes of Gen-Z customer outpacing the Travis Scott sales. As the U.S economy reopens, the food chains are hoping to keep the momentum going as competition is said to increase with the opening of other restaurant chains.
ICYMI: Restaurant chains including McDonald’s and KFC are paring back $5-and-under 'value' items in favor of more expensive $10-to-$30 combination meals https://t.co/BnZqfDCeTc pic.twitter.com/WFw3QVfFPs
— Reuters (@Reuters) June 27, 2021
During the pandemic, fast-food companies gained a huge market share when restaurants were forced to shut down operations. McDonald’s capitalised on the opportunity by coming up with lucrative deals and celebrity collaborations to exponentially increase its profit share in the market. Value meals are only said to drive in customers. They do not boost profit margins for the company. During the pandemic as most of the restaurant went out of operations, people turned to fast food. As the Fast-food chain was already teeming with customers, they decided to put more expensive items on the menu to gain a larger market share.
"Value" meals which include, sandwich, soda and fry combinations priced at $5 or less, have long been a part of the fast-food menu. Chains used the deals to lure bargain-conscious customers, bringing traffic to stores. But value meals priced at $5 are not profit drivers.
But the celeb collabs have helped the company increase the profit share. McDonald's launched its "famous orders" meal on May 26 in partnership with South Korean band BTS. Priced between $9 -$13. The move was a huge success with many people reselling paper bags, boxes, drink cups, and sauces associated with the meal on eBay. In some cases, they were sold for more than double what the actual meal costs in stores. The collaboration didn’t just drive in customers but also increased their profit share. So the move to slash off the under "value" items can probably boost future profit margins in the company.
(The above story first appeared on LatestLY on Jun 28, 2021 04:16 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).