Fast Food Frenzy: How Meal Deals are Changing the Game

Fast food giants are currently engaged in an aggressive battle to win over customers through enticing meal deals. The resurgence of these promotions is driven by several economic factors, including increased competition, shifting consumer behaviour, and the broader economic environment characterised by a cost-of-living crisis. Meal deals have become the norm in so many different markets including coffee shops, supermarkets, bakeries and now fast-food businesses.

Consumer Behaviour and Thriftiness

The spike in promotions is a direct response to consumers becoming more price-sensitive. As living costs rise, customers are looking for value, which has led them to be more selective in their dining choices. This trend is evident from the significant 33% increase in promotions at fast-food outlets, bakeries, and coffee shops from April to June this year compared to the previous year.

Decline in Footfall and Competitive Pricing

Fast-food chains faced declining footfall over the past year, which only recently saw a slight uptick. To counteract this, these businesses have employed promotions to attract more customers. McDonald's, for instance, has been compelled to rethink its pricing strategy following a dip in sales, marking the first decline since the pandemic.

Cost Structure and Price Increases

Fast food prices have risen more sharply than grocery prices, influenced by various factors such as high energy costs, increased packaging expenses, and higher minimum wages. These factors have pushed up variable costs, forcing businesses to pass some of these costs onto consumers. However, the rapid pace of these price increases has outpaced consumer adjustment, leading to a shift in consumption patterns where customers either opt for cheaper menu items or choose to eat at home.

Promotions as a Tactical Lever

Promotions are not just about attracting customers; they are also about maintaining market share in a highly competitive environment. With deals like McDonald's 3 for £3 and KFC’s £5.49 lunch deal, these chains aim to offer perceived value while driving up sales volumes. These promotions are strategically timed to coincide with periods when consumers are more likely to be budget-conscious, such as the end of the month or school holidays.

Health Concerns and Criticism

Despite the economic rationale behind these promotions, there are significant health concerns. Critics argue that multi-buy offers are more about boosting sales than providing value, often leading to increased consumption of high-calorie, high-sugar, and high-fat foods. The Obesity Health Alliance highlights the larger portion sizes and the hidden nutritional information as key issues.

Longevity of Promotions

App-based promotions are becoming a staple, with chains using them to build and maintain customer loyalty.

Exam-Style Questions

1. Discuss the economic factors that have led to the resurgence of meal deals in the fast-food industry.
2. Evaluate the impact of promotional strategies on consumer behaviour in the context of the cost-of-living crisis.
3. Analyze the potential long-term effects of continued discounting and promotions on the fast-food industry.
4. Critically assess the health implications of increased meal deals in the fast-food sector.
5. Examine the role of digital apps in the modern promotional strategies of fast-food chains.

Glossary of Key Economic Terms

1. Bottom Line: The net income or profit of a business.
2. Consumer Behaviour: The study of how individuals or groups select, purchase, and use goods and services.
3. Cost-of-Living Crisis: A situation where the cost of everyday essentials like food, housing, and transportation rises faster than wages, reducing disposable income.
4. Discounting: Offering products at reduced prices to stimulate sales.
5. Footfall: The number of people visiting a particular location, such as a retail store in a given time period such as a week.
6. Market Share: The portion of a market controlled by a particular company or product.
7. Meal Deal: A promotion offering a combination of food items at a reduced price.
8. Minimum Wage: The lowest wage permitted by law or by a special agreement.
9. Operational Costs: Expenses associated with the normal functioning of a business.
10. Price Sensitivity: The degree to which the price of a product affects consumers' purchasing behaviours.
11. Promotions: Marketing strategies aimed at increasing sales through special offers, discounts, or deals.
12. Supply Chain: The network between a company and its suppliers to produce and distribute a specific product.

Retrieval Questions

1. What factors have driven fast-food chains to increase the number of meal deals offered?
2. How have consumer behaviors changed in response to rising fast-food prices?
3. What are some criticisms related to the health impact of fast-food promotions?
4. What role do digital apps play in the promotional strategies of fast-food chains?
5. How have high operational costs influenced the pricing strategies of fast-food companies?