How value deals helped shape the fast food sector- Circana

GLOBAL – Leading global market analytics firm Circana Data has revealed value deals, spearheaded by McDonald’s shaped consumer behavior and sales in the competitive fast food environment in 2024 as brands sought to reverse dwindling sales and appeal to inflation-weary customers.

In late April, McDonald’s sounded the alarm for the industry, noting that consumers had become more “discriminating” in their choices.

By the second quarter, the company’s sales fell short of expectations, and foot traffic to U.S. restaurants declined.

In response, McDonald’s introduced a US$5 combo meal, a move followed by many competitors offering similar discounts and promotions. 

Despite the rise in value menu sales, which grew 9% through October compared to the previous year, industry experts warn that such deals alone won’t reverse the overall decline in traffic.

David Portalatin, senior vice president at Circana, stated that while value deals provide some short-term lift, they aren’t enough to offset broader traffic declines. 

Moreover, the definition of “value” has evolved. For low-income consumers, it’s about the price, but for others, it encompasses not just cost but also the quality and experience.

Michael Zuccaro, vice president of corporate finance at Moody’s, explained that even wealthier customers are becoming more selective as they notice rising prices. 

Traffic to quick-service restaurants (QSRs) fell nearly 2% this year through October, despite the proliferation of US$5 combo meals.

This is concerning, as fast food makes up nearly two-thirds of all restaurant visits, according to Circana data. The decline is particularly attributed to low-income customers, who make up a significant portion of chains like McDonald’s and Taco Bell.

Numerator data shows that diners earning less than US$40,000 account for more than a quarter of these chains’ customer bases. 

Many of these consumers are cutting back on fast food, either skipping extras like French fries or opting to cook at home.

Hottovy, an industry analyst, noted that the competition from grocery stores and other food retailers is particularly strong for lower- and middle-income consumers. 

The fast-food chains currently performing well, like Taco Bell, have maintained a strong value perception.

Traditionally, economic downturns see consumers trading down to fast food, but this time, even higher-income consumers are embracing a broader definition of value, prioritizing meal quality over cost-saving deals.

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