McDonald’s misses Q2 estimates across the board, as consumers pull back on dining out.
Nonetheless, McDonald’s stock surged $10, suggesting it’s not a big deal or that the worst is over:
People may complain about prices or stories may go viral about fast food being too expensive, but this hasn’t affected consumers’ habits much. Indeed, McDonald’s stock has performed quite well despite this.
I posit McDonald’s, like Chipotle and Wing Stop, has become yet another ‘premium product’ for the upper-middle-class. That is the biggest customer base right now. It’s a misconception that only poor or lower-middle-class people consume fast food or that fast food is most popular with those people. Maybe this was true decades ago, but not anymore. The days during the ’90s growing up and scrounging for change to go to McDonald’s are long over.
The people who are spending $40+/day on Chipotle and other premium fast food are not by any stretch poor. They have tons of disposable income and good jobs. 10-15 years ago the thought of lunch being a premium or luxury experience was inconceivable, but that is where we’re at now. Spending $100 for two on lunch or dinner has become the ‘new normal’ or an afterthought.
Moreover, it’s not as if the wealthy are only subsisting on kale or arugula. To the contrary, many of the wealthiest people in the world have quite the palate for unhealthy food, like Bill Gates or Warren Buffet, whose diets of coke, pizza, and hamburgers are well known. Uber and Doordash food is also expensive due to all the various markups and tipping, in addition to being quite flavorful and calorie-rich.
It’s not just fast food, but Americans are clearly willing to spend a premium for flavorful, calorie-dense food and large portions from independent sellers or smaller chains. Consider that there is this entire niche on YouTube or TikTok where young people make 60-second reviews of inordinately-expensive artisan or street food from local restaurants. These videos not uncommonly go viral, with thousands of up-votes and approving comments. This video below got 2 million views and 600 comments:
This is why social media narratives are sometimes confusing or contradictory. Three common narratives on social media are that:
1. Obesity is a health crisis
2. Palatable, calorie-dense foods are major contributors to obesity
3. Food inflation is out of control
Yet it’s not uncommon for these reviews to cost $60 or more in food, sometimes for only a single meal. This suggests that that price is not a factor, and a willingness to consume this expensive and unhealthy food despite the known health risks and costs. $25 for an artisan hamburger (and no sides) seems too expensive even if it’s delicious, yet there is evidently quite a large demand or else such businesses would not thrive.
So which narrative is correct? Why are the videos so popular if the food is so unhealthy and expensive? Why are these reviewers not eating beans or apples instead, which are cheaper and healthier than pork sandwiches fried in butter, and then filming eating those apples? It may not go as viral, but it would be setting a better health example and obviously much cheaper. Beans or grilled chicken breast are among the cheapest and healthiest foods out there, and high in protein.
Or consider the below video that went viral of someone cooking a 4,000-calorie steak breakfast. The comments again are overwhelmingly favorable. I would posit many of those same people would be mortified if some overweight person were eating that meal, but because the person is presumed to to be lean, he gets pass. There is probably a 1-1 overlap between people who liked the video and also think obesity is a major problem in America.
Americans, particularly on social media, seem to have a love-hate relationship with food. These reviews are not uncommonly juxtaposed with fitness content and people in the comments warning of the obesity problem. So these same people praising and consuming this calorie-rich food are at the same time warning of obesity in America and trying to get in better shape. There is a sort of cognitive dissonance in both voicing concerns about obesity or food inflation, yet consuming the very food that is causing it, or watching a video that glorifies this food.
Maybe it also shows the disconnect between social media and the real world. In the latter, such concerns about health or virtue signaling about nutrition as expressed on social media, goes out the window when the world is no longer watching. Or maybe no one is fully logically consistent in their views. In the end, people will continue to consume this food even knowing full-well it’s unhealthy and overpriced. And for that, McDonald’s should not be too concerned.