McDonald's Price Increase May Be on the Way

McDonald's prices may increaseDespite government findings that inflation is almost nil, the price of wheat is up, as is the cost of corn and soybeans. Consequently, beef and pork prices are also rising. How does a worldwide chain such as McDonald's deal with higher supply prices? A price increase may be on the way.

This was one caution voiced by McDonald's Chief Financial Officer Pete Bensen as part of the company's fiscal fourth quarter financial report released yesterday. The report was mostly favorable, with quarterly earnings at 2.1% despite the impact of foul weather in Europe and the U.S. in December.Around three-quarters of McDonald's grocery bill comes from 10 commodities, and the company lumps these together into a basket of goods in order to forecast yearly expenses. It expects the price of this basket to rise 2% to 2.5% in this country and 3.5% to 4.5% in Europe. Given the low price points of its restaurant offerings, such an increase could put extreme pressure on the price of these bargain foods.

Bensen did not detail any price increase plans, other than to say that they would not be across-the-board, and primarily driven by rising commodity costs.
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