Why fast food value menus aren’t as good a deal as you might think
New York (CNN) — Value is the new buzzword at fast-food chains nationwide.
After rising prices turned customers off, the restaurants recently responded by unveiling value menus.
For instance, McDonald’s has a $5 value meal, which includes a McDouble cheeseburger or a McChicken sandwich, plus small french fries, 4-piece chicken nuggets and a small soft drink.
At Taco Bell, you can now get two different kinds of tacos, a five-layer burrito, chips with nacho cheese sauces and a medium drink for $7. That’s 55% cheaper than ordering the items individually.
Like McDonald’s, Burger King is offering a $5 meal bundle where customers can select one of three kinds of burgers to pair with chicken nuggets and a beverage.
But just how much value is there in these kinds of “value” meals?
Well, actually, not as much as you may think, since prices for many key ingredients used in value meals are coming down. In other words: You’re paying the going rate (or more).
Cheese, potatoes and tomatoes are getting cheaper
Many of the recently announced value meals use cheese, potatoes and tomatoes. Compared to last June, cheese prices are down 2.1%, tomato prices are down 1.1% and potato prices are down 3.9%, according to the Bureau of Labor Statistics’ latest Consumer Price Index report released Thursday.
On a monthly basis, cheese prices didn’t change in June. Tomato and potato prices slid by 0.3% and 3.3%, respectively, when adjusting for seasonality.
Meat eaters benefit the most from the value meal war
If you eat meat, you’re more likely to benefit from some value menu items. That’s because meat prices are up 3.5% for the year. From May to June, though, meat prices fell by 0.3%.
Beef prices were among the steepest price increases across all meat categories tracked in the CPI. For instance, beef roast prices are up 10% and ground beef prices are up 4.5% compared to last June.
Pork prices are also up 3.8% compared to a year ago. But prices are a bit lower compared to last month. Chicken prices rose more modestly over the course of the year, up just 0.5%. On a monthly basis, they fell by 0.2% in June.
Given that meat prices are rising at a faster pace than most foods, it’s no wonder most fast-food chains are only offering value menus for a limited time. In effect, they’re maintaining their ability to raise prices in the future.
But for the time being, Joe Erlinger, president of McDonald’s USA, said value meals aren’t a loss leader for the company and that “we are totally comfortable with the profitability of it.”
“It’s a way to really bring value and affordability to our customers at a time when the consumer is really stretched,” he said at a conference hosted by The Wall Street Journal last month.
Dining out remains a luxury for many
Another consideration: It’s a lot more expensive to dine out than cook at home.
That shouldn’t be surprising since there are a lot more costs associated with dining out — one of the biggest being labor — that aren’t incurred at home.
But you’re likely to experience more sticker shock dining out than shopping at grocery stores.
Last month, food prices overall rose by 0.2% from May. For the year, food prices are up 2.2%.
Food in stores cost 1.1% more compared to a year ago, and those prices are up 0.1% on a monthly basis. Menu prices at restaurants and cafes are up 4.1% annually and 0.4% from May to June.
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