McD Price Increases - Big Mac doesnât lie
You all know the famous Big Mac by McDonaldâs. It is that famous that thereâs even a Big Mac index, tracking the inflation in a country based on the price of a Big Mac there.
Visual Capitalist did a very interesting post these days where they aggregated the price inflation of the Big Mac in the US over the last decade, along with other items and menues. What is interesting is that the Big Mac wasnât the highest inflated product of McD.
The price of a Big Mac rose from $3.99 in 2014 to $5.99 last year. Thats a +50% increase over a decade or an annual price inflation of +4.1%! That shows a much higher Inflation than the 2% the Fed wants to have. Whats even more interesting is, that the study showed, that price inflation by McD was much higher than the average price increases over the past decade.
Good or Bad? It depends
So what does that mean? McDonalds raised prices for Big Mac and other products significantly, higher than the average US price inflation within the past decade. Is that good or rather bad? Well it depends who you ask.
Being a consumer its annoying, since you have to pay more for your Burgers and Fries. As an Investor this is good news since it shows that the company is able to raise their prices even more than others which is driving revenues and supports earnings. This is one reason why the McD stock has outperformed the general stock market over the last decade (McD +210% vs S&P 500 +189% without dividends).
For me that pricing power is another reason why I hold on to my $MCD position and trust in their brands.
