McDonald's had a tough end to a successful year, as its sales dropped in several markets because of the Gaza conflict.
The company's global sales at restaurants open for at least one year grew by only 3.4% from October to December. This increase was much lower than the 4.7% rise that financial experts on Wall Street had predicted, based on a survey by FactSet.
McDonald's Faces Middle East Boycott Over Free Meals to Israeli Soldiers
McDonald's has faced backlash in the Middle East after its Israeli branch, run by a local franchisee, started giving free meals to Israeli soldiers in October. This move sparked anger among customers in the region.
As a reaction, some McDonald's franchises, like the one in Oman, began donating to support relief work in Gaza.
Last month, Chris Kempczinski, the President and CEO of McDonald's, expressed concern over the spread of "misinformation" in the Middle East and other regions, which he believes is affecting the company's sales.
The controversy has led to customer boycotts and forced McDonald's to reduce its operating hours or even shut down some stores temporarily due to protests.
Kempczinski emphasized McDonald's stance against violence and hate speech in a LinkedIn post, stating, "We abhor violence of any kind and firmly stand against hate speech, and we will always proudly open our doors to anyone."
He recently stated that the ongoing conflict and war will continue impacting the company negatively. "This is a human tragedy, and it's affecting well-known brands like ours," he said, acknowledging the situation's gravity.
McDonald's is not alone in facing backlash due to the war. Starbucks also reported boycotts in the Middle East and other places last week, stemming from its perceived support for Israel.
In the United States, McDonald's reported a 4.3% rise in same-store sales from October to December. This boost was attributed to higher prices and successful marketing efforts, such as the Happy Meal collaboration with artist Kerwin Frost.
However, Kempczinski noted a decline in visits and spending among customers with annual incomes of $45,000 or less.
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McDonald's Plans Low-Cost Marketing to Attract Customers
Kempczinski explained that as the cost of groceries decreases, more customers choose to eat at home. To counter this trend, McDonald's aims to bring these customers back to its restaurants this year by focusing its marketing on affordable options.
Ian Borden, McDonald's Chief Financial Officer, shared insights on their strategy. "We know that consumers are cautious and tired of high prices. We're committed to making pricing decisions led by consumer needs as we move into 2024," he said.
In China, where consumer confidence is at an all-time low, McDonald's is stepping up its game by offering more deals to compete with rivals, as per Borden's comments.
This shift in strategy marks a surprising conclusion to a year that was otherwise very successful for the fast-food giant. McDonald's saw a substantial increase in revenue, which rose by 10% to almost $25 billion, thanks to viral marketing campaigns like last spring's Grimace shakes and improvements to its menu.
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