A hunger for something different
Credit: Hana Mara / Pexels
OZ’s Jerry Olson shared an article about the evolution of Americans’ spending habits in 2024. This is in the wake of McDonald’s and Starbucks announcing disappointing sales numbers this week.
Americans are still spending, just on different things. For example, while Starbucks and McDonald’s have been struggling, Chipotle and Texas Roadhouse reported robust sales increases over the same period in 2023.
Part of the issue may be that Starbucks and McDonald’s have lost their differentiation a bit. McDonald’s prices are up 40 percent since 2019, such a significant hike that they have become almost a symbol (fairly or not) of our current battle with inflation. As the CEO of Applebee’s says in the CNN article above, “You can get our burger for $9.99 … why would you take a $10 burger … that you can eat in a bag out of your car?”
Meanwhile, Starbucks’ seems to be seeing more mom-and-pop competitors who have similar product offerings. At one time, there was a fear that Starbucks would squeeze out smaller competitors. If anything, those competitors are now rising up to put a squeeze on Starbucks. Plus, high prices may be biting them, as well.
Meanwhile, interest seems to have spiked in other categories. Maybe you won’t spend $10 on a McDonald’s burger, but you might spend that money on video games, books, artwork, outdoor gear, or travel. Search traffic for those categories has been booming. Some of that is called YOLO (you only live once) spending. No slowdown there.
These things are often cyclical. McDonald’s is already responding to price concerns with a $5 value meal and Starbucks is introducing new menu items. Moreover, consumer confidence is turning more positive.
But one wonders if there is a deeper cultural change going on beneath the hood. Perhaps, for various cultural reasons, people are prioritizing their spending differently, emphasizing happiness (and experiences, both large and small) over what they perceive as mere functionality.