McDonald's 99 Cent Coffee in Trouble

McDonald’s Corp. (NYSE: MCD) still sells $0.99 coffee. In the age of surging inflation, can that last? The world’s best-known fast-food chain says the price covers any size of “Premium Roast” or “Iced Coffee.” Customers have to use the McDonald’s app to quality. The deal gets ever more expensive for McDonald’s as labor, transportation and coffee prices rise. (Additionally, for 99 cents, who would not order the largest container available).

McDonald’s may lose money on the offer. People who stop by McDonald’s probably order more than one item most of the time. The low-priced coffee may be paired with a breakfast item from the “all day” menu. Based on sales of a second item, McDonald’s probably makes money on the transaction.

The challenge for McDonald’s starts with transportation costs. Prices of diesel fuel, used in most trucks, have risen by over 50% in the past year. In many cases, that has been passed on to the companies that receive the deliveries.

Coffee prices recently hit an all-time high. Experts expect that to continue. Inflation is not the only reason for this. Coffee crops have been poor recently.

McDonald’s also has rising labor prices. Some of its workers make as little as $13 an hour. McDonald’s said that in many stores they will reach $15 by 2024. In the meantime, the consumer price index has surged by 8% in recent months. McDonald’s faces pressure to raise hourly wages now.

McDonald’s is not the only retailer pressed by inflation. Dollar Tree recently raised the price on some items from $1.00 to $1.25.

But McDonald’s will still sell people $0.99 coffee.

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