McDonalds Sales Thriving in Recession
This current difficult environment is sending a lot of consumers scrambling for cheaper alternatives in dining. That is where McDonald’s distinguishes itself. With January same-store-sales up more than 7% worldwide – even in the face of the global financial meltdown – McDonald’s is proving that it can not only execute, but thrive. Indeed, sales in Asia were up 10%, while those in Europe were up 7%. Even U.S. sales were up 5%.
McDonald’s is the unparalleled leader in the arena of quick service and value dining. With roughly 31,000 restaurants in 118 countries, a balance sheet laden with $1.5 billion in cash and a size and market capitalization that dwarfs the competition, it is almost impossible to compete against the Golden Arches.
It doesn’t stop there, either: In an environment such as this one, the strong get stronger and run away with the market as the weak disappear..
The Oak Brook, Ill.-based McDonald’s is the world’s leading food-service retailer, with more than 30,000 local restaurants serving 52 million people in more than 100 countries every day. More than 70% of McDonald’s restaurants are owned by independent local men and women. McDonald’s is also one of the world’s most-recognizable and most-valuable brands.
Not only is McDonald’s the largest, but its huge geographic diversification and economies of scale imbues the company with its many enduring competitive advantages. These advantages result in huge cost savings that are not as important in good times, when the industry has runaway pricing power. During lean, economic times, however, those cost savings are the difference between life and death.. If you are a supplier, and you sell to the Golden Arches – much like selling merchandise to Wal-Mart – you have very little bargaining power.
To the advantages related to economies of scale and migration to cheaper alternatives by consumers, you need to add the renewed inflation policy and the drop in commodity prices. Other than the cost of chicken, which is about 10% higher than last year, all other key food ingredients have dropped between 5% (beef) to 45% (milk). This will show up nicely in McDonald’s margins, which, coupled with sales growth, will give the company’s bottom line a nice push higher.
Who says that you cannot expand profits in a recession?
McDonald’s is the unparalleled leader in the arena of quick service and value dining. With roughly 31,000 restaurants in 118 countries, a balance sheet laden with $1.5 billion in cash and a size and market capitalization that dwarfs the competition, it is almost impossible to compete against the Golden Arches.
It doesn’t stop there, either: In an environment such as this one, the strong get stronger and run away with the market as the weak disappear..
The Oak Brook, Ill.-based McDonald’s is the world’s leading food-service retailer, with more than 30,000 local restaurants serving 52 million people in more than 100 countries every day. More than 70% of McDonald’s restaurants are owned by independent local men and women. McDonald’s is also one of the world’s most-recognizable and most-valuable brands.
Not only is McDonald’s the largest, but its huge geographic diversification and economies of scale imbues the company with its many enduring competitive advantages. These advantages result in huge cost savings that are not as important in good times, when the industry has runaway pricing power. During lean, economic times, however, those cost savings are the difference between life and death.. If you are a supplier, and you sell to the Golden Arches – much like selling merchandise to Wal-Mart – you have very little bargaining power.
To the advantages related to economies of scale and migration to cheaper alternatives by consumers, you need to add the renewed inflation policy and the drop in commodity prices. Other than the cost of chicken, which is about 10% higher than last year, all other key food ingredients have dropped between 5% (beef) to 45% (milk). This will show up nicely in McDonald’s margins, which, coupled with sales growth, will give the company’s bottom line a nice push higher.
Who says that you cannot expand profits in a recession?
