Rising beef prices push McDonald’s toward bigger, better burgers

McDonald’s knows its customers want value, and it also knows they want burgers. Delivering both of those has become a challenge, given the rising cost of beef.

That’s partially because the American cattle herd is at its smallest size in 75 years, the Associated Press (AP) reported.

“The national herd size isn’t the only factor that determines what beef costs at the grocery store. Still, the dwindling number of cattle is a key reason the average price of all uncooked ground beef in the U.S. was $6.86 per pound in March, 3 cents off the record high set in February, according to federal statistics. That price in March is up nearly 48% from March 2021,” added the AP.

Higher beef prices mean lower margins on hamburgers for chains like McDonald’s, unless they raise prices. The fast-food giant, however, has responded to the crisis by improving the non-beef aspects of its burgers and betting people will pay more for premium products.

McDonald’s tries to build a better burger

McDonald’s “Best Burger” initiative applies across core items, including the Big Mac, McDouble, and other standard burgers, standardizing changes in preparation and ingredients as part of a broader effort to improve consistency and perceived quality.

The changes include (in McDonald’s words):

Softer, pillowy buns that are freshly toasted to a golden brown Perfectly melted cheese that will make you want to savor every last bit off the wrapper  Juicier, caramelized flavor from adding white onions to the patties while they’re still on the grill  Even more of everyone’s favorite Big Mac sauce, bringing more tangy sweetness in every Big Mac bite 
Source: McDonald’s

McDonald’s Global Restaurant Experience Officer Jill McDonald shared the impact of Best Burger during the chain’s fourth-quarter earnings call.

“Starting with beef. “We’ve continued rolling out Best Burger, which is now in more than 85 markets and on track to deliver on our commitment to be in nearly all markets by the end of 2026. Best Burger is the key to hotter, juicier and even tastier burgers, which improve customer satisfaction scores and streamline operations for restaurant crew,” she said.

McDonald’s has also added a premium burger

In addition to Best Burger, introducing new value menu offerings, and adding the $2.99 Snack Wrap, McDonald’s has debuted a larger burger. The premise is that a more filling product will feel like a value to customers, even at a higher price than the Big Mac.

Former McDonald’s International President Jo Sempels explained the need during a 2023 investor day, Nation’s Restaurant News reported.

“There is a desire for larger, high-quality burgers that fill you up and are delivered in a convenient and affordable way,” he said.

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That plan has moved forward as the Big Arch has been rolled out globally, including in the U.S.

“We also began to pilot Big Arch about 1.5 years ago, and it’s shown strong traction across several markets. Customers are responding to this delicious, more satisfying burger that meets their demand for something heartier while still feeling distinctly McDonald’s,” McDonald said.

McDonald’s faces a dilemma due to rising beef prices and consumers pushing for more value.

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McDonald’s goes for big value

The Big Arch offers 14 ounces of beef and comes in at 1,020 calories, while the Big Mac has 7.6 ounces of beef and 590 calories, according to McDonald’s Nutrition page.

McDonald’s has positioned the burger as a value-for-its-size play, not as a premium burger.

“McDonald’s is trying to find a balance between value and premium products in a challenged consumer spending environment in the U.S. and around the world,” said Raymond James analyst Bryan Elliott, Forbes reported.

Balancing value and price is a challenge.

“The real nirvana for this company is if they can sell premium products but also drive traffic and value. Those two things run incongruously — when you promote value, it’s hard to drive a premium product,” Jefferies analyst Andy Barish said.

Related: Walmart unveils exclusive, limited-edition Mountain Dew lineup

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