Burgers for burghers macs good sense

McDonald’s is venturing beyond its value proposition into premium offerings as budget-conscious consumers dial down on fast food while upmarket chains and restaurants take a big bite of gourmet burgers. Inflation has taken a toll on the current value pack, which does not come anywhere close to the original offering. This has diluted the messaging of cheap meals on the go, pivoting quick-service restaurants up the value chain. Other chains have already drawn up their premium strategies, but McDonald’s may face bigger challenges, given the centrality of the brand’s value proposition. If it manages the transition with a signature menu, its heft could alter the genre of fast food, and the distinction with fine dining will blur.

The post-Covid spike in global food inflation is dissipating, but climate change increases vulnerability to shocks. The pandemic has driven a wider wedge in income distribution that affects the growth of global fast-food chains. The premium segment is outpacing the mass market, as in other consumption categories. Downtrading is pushing investor interest towards disruptors across consumer goods as market leaders seek revenue growth through premiumisation. Some of the segment shifts will be reversible when discretionary consumption revives. Other changes may be permanently baked into the business plans of fast-food chains.

In India, the premiumisation of consumption is being driven by global brands. McDonald’s is the latest to join other businesses that are betting on a shift in consumer preferences from price sensitivity to value consciousness. The mass market in India begins at a lower price point, and fast-food chains may find it easier to swivel into the premium segment. Food inflation in the country has been less pliant to policy measures, another contributory factor in premiumisation. Finally, India’s limited social security may cause a longer delay in the revival of discretionary consumption. There should be interesting findings for the Indian restaurant industry in McDonald’s experiment with its menu.