The Fast-Food Frenzy: Intense Competition Drives Surge in Promotional Offers
The fast-food industry has become embroiled in a highly competitive race, with major chains vying to offer customers the most enticing deals. From McDonald's low-cost breakfast options to Greggs' bakery specials, and lunch promotions at KFC and Domino's, a surge in fast-food discounts and offers has become a prevalent trend.
So what is fueling this proliferation of special offers in the fast-food sector?
The primary driver is that customers are becoming more cost-conscious, and the restaurant chains are seeking to lure them back with these promotional incentives. However, this flood of fast-food deals has raised concerns among critics about the potential health implications.
According to data from Meaningful Vision, which tracks the industry, the number of promotions offered at fast-food restaurants, bakeries, and coffee shops increased by a third between April and June this year, compared to the same period in 2022.
"The use of promotions is growing as a key tool to generate additional traffic, which has not been growing," explains Meaningful Vision's CEO, Maria Vanifatova. Footfall in the sector was in decline over the past year, she notes, only now returning to a 1% year-over-year increase.
This aggressive promotional strategy by fast-food operators is a response to the sharp price increases they implemented during the cost-of-living crisis. As Siobhan Gehin, a retail expert at consulting firm Roland Berger, points out, fast-food prices on average increased slightly more than prices in grocery chains, making customers either trade down to cheaper menu items or eat at home instead.
To counter this decline in demand, fast-food companies are "using the promotion lever to try to stimulate" customer traffic and sales, according to Ms. Gehin. This intense competition and focus on promotional offers in the fast-food industry reflects the industry's efforts to adapt to the changing spending habits of cost-conscious consumers.
Pub Meals vs. Fast-Food Deals: Balancing the Bottom Line
It's important to remember that businesses, including fast-food chains, have to keep an eye on their bottom line. McDonald's, for instance, saw its first sales decline since the pandemic in the second quarter of this year, leading the company to re-evaluate its pricing strategy.
As independent retail expert Clare Bailey points out, a sit-down meal at a pub can now cost not much more than a fast-food meal deal. However, the fast-food sector has had to raise prices due to various factors, such as high energy costs, packaging costs, increases in the minimum wage, and in McDonald's case, a commitment to locally source its beef.
Alistair Macrow, the chief executive of McDonald's UK and Ireland, acknowledges that consumers are facing tough decisions about where and when to spend their money, and that value is "more important than ever." He says the company listens to customer feedback when considering what offers to run, such as the "3 for £3 Deal" that was introduced at the end of the month and during school half-terms to help families.
Additionally, McDonald's introduced a breakfast deal in the spring to compete with Greggs, as "customers told us they need to prioritize value at breakfast." This deal has also been brought back for a limited period.
Maria Vanifatova, a market analyst, notes that the lunch market has become particularly competitive, with various fast-food chains introducing their own meal deals, such as KFC's £5.49 lunch deal and Domino's £4 Cheeky Little Pizza.
This intense competition and focus on promotional offers in the fast-food industry reflect the companies' efforts to balance their bottom line with the changing spending habits of cost-conscious consumers.
The Concern Over Marketing Tactics
While fast-food chains claim they are offering value for money to their customers, some experts are skeptical about their true intentions. Katherine Jenner, the director of the Obesity Health Alliance, believes that these promotional offers are not solely designed to save people money, but rather serve as a marketing tactic to get customers to buy items they might not have otherwise purchased.
Jenner points out that the portion sizes in fast-food establishments are typically much larger than what one would make at home, and the products also contain higher amounts of sugar, salt, and fat. Furthermore, she argues that it is difficult for consumers to make informed decisions about their purchases, as the nutritional information is not easily accessible.
The proliferation of these promotions may continue, as Clare Bailey, the independent retail expert, suggests that once customers become accustomed to discounts and vouchers, it becomes challenging to take them away, as many shoppers may have come to rely on them and may not have visited the establishments at full price.
However, Siobhan Gehin, a market analyst, believes that the level of discounting may gradually decrease as consumer sentiment improves and interest rates ease, though she expects it to continue for the rest of the year.
One trend that appears to be here to stay is the offering of deals through mobile apps. Examples include McDonald's Mondays and Burger King's Whopper Wednesdays, where companies are targeting their loyal customers with exclusive offers to maintain their loyalty.
While these promotional tactics may appeal to consumers in the short term, the Obesity Health Alliance's Jenner raises concerns about the potential health implications of increased consumption of fast food, particularly regarding portion sizes and nutrient content.
Reference: Shanaz M. (4 Aug, 2024) The Rise of Fast-Food Promotions: Examining the Factors Behind the Surge
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