While the hamburger market in the US is experiencing a slump, hamburger consumption in Korea is significantly increasing, driven by a premium strategy and rising food service prices.
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McDonald's stock in the US has fallen by more than 15% in the last six months, experiencing sluggish performance. This situation refers to McDonald's in the US, not in Korea, showing poor performance in the stock market.
McDonald's US's same-store sales growth rate was only 0.8%. This low level is ambiguous to even consider as sales growth, indicating a weakening of growth momentum in the US market.
McDonald's sluggish performance is attributed to price increases. In the five years since COVID-19, food prices in the US have surged by 30%, and dining out prices by 31.7%, forcing McDonald's to raise prices.
Americans are feeling a significant burden from rising prices. A poll showed that 60% of Americans cited rising cost of living as their biggest concern, with 88% specifically mentioning groceries and food costs as the most burdensome. This economic pressure dampens consumer spending sentiment for dining establishments like McDonald's.
McDonald's had no choice but to raise prices due to increased operating costs. This is because ingredient prices in the US have risen by 34% and labor costs by nearly 40% since COVID-19. Beef prices, in particular, have soared to record highs, pushing overall restaurant operating costs up by 36-40%.
McDonald's attempted a premium hamburger strategy, but it failed in the US market. There have been few past successes with premium burgers, and US consumers did not believe McDonald's was worth paying higher prices for. Customers wanted cheaper, bigger burgers rather than more expensive ones, and it was difficult to overcome McDonald's 'junk food' image, according to analysis. This shows that the premium strategy, often referred to as 'K-style', did not work in the US.
After the premium strategy failed, McDonald's shifted to a 'McValue' strategy, offering affordable and cost-effective menu items. McDonald's declared that it would usher in a new era of value through this.
McValue, launched in 2026, consists of menu items under $3. A McChicken, McDouble, Chicken McNuggets, and fries cost $3, while a Sausage McMuffin sells for $1.50. This is a strategy to attract consumers with low prices.
The launch of low-priced menu items like McValue causes a problem of declining profitability. Concerns are raised that if only value-for-money menus sell well, it could place a significant burden on overall profitability, and consumer dissatisfaction with quality might also increase due to the low prices.
The introduction of low-priced menus like McValue is leading to a decrease in profit margins, exacerbating the difficulties faced by franchisees. The already low profit margins of fast-food chains are further reduced by the parent company's launch of ultra-low-priced menus and frequent menu changes, leading to growing dissatisfaction among franchisees.
The McDonald's CEO, in the earnings announcement, pointed to franchisees' failure to consistently implement discount strategies as the cause of the failure. US franchises have autonomy in pricing, often not following corporate directives. However, in this situation, thousands of fast-food restaurants are closing across the US. This indicates an intensifying conflict between the parent company and franchisees.
The US fast-food industry is currently evaluated as having lost its growth momentum. It is no longer a growing market but a zero-sum game, where market share must be taken from competitors like Burger King, KFC, and In-N-Out. As a result, companies are struggling to compete with each other, expand discounts, and lower prices.
In the US, hamburgers still carry a strong negative image as 'junk food,' leading to rejection by younger generations (Gen MG) who prioritize health. In contrast, in Korea, emphasizing high-quality ingredients like handmade and organic products is building a positive image as 'healthy food.' This difference in perception is analyzed as creating the contrasting trends in the hamburger markets of the two countries.
Some argue that hamburgers can be made healthy, but it is pointed out that 'zero hamburgers' are virtually impossible. If meat or bread is removed, it is difficult to call it a true hamburger, and merely using good ingredients does not necessarily make Americans perceive it as healthy food, which is a limitation.
The anti-drive-thru movement in the US superficially cites environmental pollution and safety concerns. Air pollution from idling car queues and increased pedestrian risk are among the reasons. However, in reality, opposition tends to increase when residents' incomes rise and property values increase in those areas. This suggests that the underlying intention might be to protect local income levels and property values rather than solely environmental issues.
The anti-drive-thru movement is interpreted as effectively demanding the withdrawal of fast-food restaurants. This is because 70% of US fast-food revenue comes from drive-thrus. Therefore, preventing drive-thrus can be seen as an attempt to block fast-food restaurants themselves.
Korea is an exceptional country where McDonald's is showing tremendous growth despite national income approaching $40,000. Over the past decade, the domestic burger market has grown 2.5 times, showing the steepest growth among domestic dining categories and proving that South Korea is a 'burger-loving nation'.
McDonald's Korea has officially announced aggressive expansion plans. It aims to expand its national stores to 500 and achieve 2 trillion won in sales within three years. With an astonishing record of 30 consecutive quarters of growth, expectations for achieving these goals are high.
Amidst generally high domestic dining out prices, hamburgers are positioning themselves as a reasonably priced alternative. With costs for other dining options rising significantly, consumers are increasingly seeking relatively affordable yet satisfying hamburgers, according to analysis. The fact that a pizza can cost 30,000 won and other Central and South American taco dishes can be even more expensive supports this.
In Korea, hamburgers are perceived as a premium dining option, leading to a culture of 'queuing to eat.' When an In-N-Out pop-up store recently opened in Gangnam-gu, Seoul, a remarkable sight unfolded with crowds queuing for three hours to buy burgers. This is an example showing the high value Korean consumers place on hamburgers.
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