Rising food and paper costs may have you paying more for your Big Mac. / Image: pointnshoot/Flickr/CC BY

McDonald’s is the world’s leader in the fast food market, garnering about 19 percent of that niche. However, faced with the rising costs of food and paper, the company has announced that it plans to implement more small price increases throughout the year in order to offset this trend somewhat.

Earlier estimates proved inadequate

McDonald’s estimates that food costs will rise between 4 percent and 4.5 percent in the U.S. and Europe this year. This is an increase from earlier estimates, which projected only 2 to 2.5 percent increases in the U.S. and 3.5 to 4.5 in Europe. Paper costs were also cited in the projected price hikes. McDonald’s claims that food and paper costs ate up 33.6 percent of the company’s sales in the first quarter of 2011. Those costs were up from 32.9 percent in the same quarter a year ago.

A bad time to raise prices

Consumers who struggle daily with the rising costs for housing, fuel and the other staples, may just stay home to eat if prices increase too significantly.  Steve West, an analyst for securities-related financial services company Stifel Nicolaus, said, “It’s very hard to pass through price increase[s] right now.”

Stock prices fall

After the company announced that it planned to raise prices, shares fell 1.5 percent in midday trading on the New York Stock Exchange.

The company’s CFO Pete Bensen says the company intends to sacrifice some short term profits in favor of long term growth.

Prices up by 1 percent

In March, McDonald’s implemented a 1 percent menu price increase in the U.S. and Europe. Other increases are planned throughout the year. Price increases are also planned for its stores in China.

McDonald’s continues to lead competition

McDonald’s continues to outperform its competition. Peter Jankovskis, an officer at Oakbrook Investments, claims, “The bottom line is they’re still doing a great job of growing revenue.”  The total first-quarter revenue for the corporation rose 9 percent, to $6.1 billion.  Sales in the European stores were especially significant.

Sources

Reuters

MSNBC

Daily Finance

Retailers need money, too!

It may sound crazy, but consumers do have an advantage in today’s retail market. Everyone is looking to make some money and retailers are no exception. According to a recent article on The Motley Fool, if you are out shopping for a particular consumer item, it is definitely to your advantage to inquire about a discount.

Motley reports that a 2007 survey by Consumer Reports found that 90 percent of persons who bargained with sales people got a discount on at least one sale over a three-year period. Considering that the survey was done before retailers became desperate to keep customers, it is likely that the results for consumers would be even better now.

Where to look for a bargain

There are discounts to be had on all kinds of products and services if you don’t mind asking. Some people are better at bargaining than others so sticking to major purchases to start with is probably your best bet.

Do your research first

If you know the best prices ahead of time you’ll be better prepared to negotiate. If you enjoy getting out and really seeing everything, you can comparison shop the old-fashioned way by going from store to store or calling around. For those who prefer a less hands-on approach the process can be much quicker and easier. Many online sites offer a price comparison on products and tell you where the item is available for the lowest cost. You can also go from store to store online and compare for yourself.

Know all the little tricks

Do your research on the best times of the year to buy the item you’re looking for. If you can’t wait until that time,try to shop when stores are uncrowded and sales people are more eager to make sales. Also be aware of price-matching discounts offered by some stores. Different retailers have different rules, so be sure to have it all straight ahead of time, but the gist is that if your find a lower price elsewhere (not online usually) then the competing store will beat the price by a certain amount. This can be a quick way to get a great deal. Some of the locally owned businesses may be even more likely to bargain with you because they have no corporate office to contend with; they make the call about what price they want to offer.

Don’t go over the top

It is important not to get so carried away with your bargaining that you lose your cool. Sometimes the price simply can’t be lowered.  Even when the price can be lowered, the salesperson may only be willing to lower it for someone who is being reasonable. If you need to walk away for a few moments or a couple of hours to regain composure or to really think about the deal, then do so. It may even work in your favor to walk away for a while because the salesperson may become even more impatient for the sale and offer a better deal. So get out there and enjoy the wealth of savings available to you.