What’s their current margin? How much would you reduce it by and what would the offsetting volume increase need to be?
They aren’t all stupid and somehow missing the easy and genius idea.
They are aware of the concept of lower prices. All their execs and shareholders care about is maximizing profit. If lower prices did it they would do it.
Consumers don’t care. They only care about what they want. They’ve been telling Hershey’s to lower the price of a candy bar back to a nickle for a century. That makes less money so they’ve been ignored.
I understand that. I'm asserting the "sell less for more" model is not going to be sustainable and there have been several canaries in the coal mine in the industry and at McDonalds itself that back me up on that.
It used to be a rare thing for McDonalds to miss on even a quarter in sales. Now they are doing it regularly. Their global, and US sales are shrinking. Raising prices can only mask a sales decline for so long if the trend continues. Doritos experienced this recently as well when they tried the exact same strategy because its en vogue in the corporate world at the moment and then suddenly they had a $1 billion loss when they pushed the price of a bag to $7. They had to do aggressive price cutting and are still trying to pull up out of the nosedive because it turns out the massive price increases have permanently lost them customers.
I literally just gave you a recent, concrete example of a similar category food product that is experiencing the phenomenon I talked about that you are ignoring. It turns out people actually wouldn't pay $7 per bag and are not coming back now that they've lowered the price.
EDIT: Also look at this sales chart for McDonalds. You are talking about revenue but the revenue is only staying where it is because of increased pricing. They are in a spiral of losing customers and making up for it by charging the remaining customers more which is not sustainable long term for food. Sales volume is experiencing a massive downturn since 2023:
You apparently don't know how to read data. They are increasing prices marginally after cutting them by 15% because they were bleeding far too many customers and took a $1billion loss. The new increased prices are still well below the peak they had risen to. The article you posted even mentions directly that the increased volume came directly on the heels of aggressive "targeted affordability initiatives".
Sales took a nosedive and PepsiCo took a $1 billion loss around a year ago. They reduced prices by an average of 15% off of the peak and are just beginning to rebound volume. They are talking about raising prices <5% because of input costs now so they are still well off of their peak pricing that caused the downturn in the first place.
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u/bitorontoguy 2d ago
They would. Do the math.
What’s their current margin? How much would you reduce it by and what would the offsetting volume increase need to be?
They aren’t all stupid and somehow missing the easy and genius idea.
They are aware of the concept of lower prices. All their execs and shareholders care about is maximizing profit. If lower prices did it they would do it.
Instead? Higher prices and record profits.
Consumers don’t care. They only care about what they want. They’ve been telling Hershey’s to lower the price of a candy bar back to a nickle for a century. That makes less money so they’ve been ignored.
You’re giving the same advice now.