Coffee Beans Are Skyrocketing! Are There Still Coffee Shops Daring to Sell Coffee for Just a Dollar?!

McDonald's $1 Coffee: How Long Can It Last in an Era of High Inflation?

In this era of soaring inflation, coffee shops across all regions and brands have been adjusting their product pricing upward. However, McDonald's in the United States still sells coffee for just $1. With such low pricing during a period of high inflation, how long can this be sustained?

McDonald's states that the $1 price covers all cup sizes of premium roasted coffee and iced coffee. As labor, transportation, and raw material costs continue to rise, McDonald's will pay the price for maintaining favorable pricing while facing increasingly expensive costs. (After all, with prices as low as $1 regardless of cup size, who wouldn't choose the largest size?)

This chain brand might incur losses as a result. Regular McDonald's customers might purchase more than one item, with low-priced coffee complementing any option from the all-day breakfast menu. Depending on the sales of additional items, McDonald's could profit from such transactions.

Major Challenges Facing McDonald's

The first challenge McDonald's must confront is transportation costs. Many trucks used in the American transportation industry run on diesel fuel, whose price has increased by 50% over the past year.

Secondly, coffee prices have reached record highs multiple times since the pandemic, which is closely related to reduced harvests in coffee-producing regions. According to Coffee Financial Network, drought conditions in Brazil's coffee-producing areas are currently worse than during the same period in 2021. This not only creates many uncertainties for this year's Brazilian Arabica production but may also further affect next year's coffee output.

Rainfall performance in Brazil's coffee-producing regions over the past 30 days

Meanwhile, McDonald's in the United States is facing rising labor costs. Some employees earn only $13 per hour. McDonald's has stated that by 2024, many store employees will reach $15 per hour. According to CNN reports, the U.S. Consumer Price Index had already risen to 9.1% in June 2022, and McDonald's now faces pressure to increase hourly wages for employees.

McDonald's is not the only retailer feeling pressure from this inflation, but McDonald's in the United States continues to sell $1 coffee to consumers.

Global Context and Comparisons

In such an environment, not raising coffee prices is uncommon. Coffee Workshop mentioned on July 14th that a long-time customer of McCafé in Sydney, Australia, told 7News in an interview that on that day, he spent A$5.3 for a medium latte at McDonald's, while the previous day he spent only A$5.05 for the same medium latte at the same store.

Currently, the global environment is creating significant pressure across all industries. Skyrocketing oil and energy prices have led to worsening inflation in various countries, ultimately causing chain brands to raise product prices and pass some of the cost burden onto consumers.

International Examples

Previously, McDonald's Canada also offered coffee of any size for one dollar to consumers, but this promotion was later discontinued. Until February 2022, McDonald's Canada restored the $1 coffee deal. However, according to multiple Canadian media reports, this was a limited-time promotion, and the $1 only purchased a medium-sized coffee.

Looking Forward

How long do you think McDonald's $1 coffee in the United States can last?

Image sources: Coffee Financial Network, CNN, Internet

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