'Wage-Driven Inflation' Causes US Hamburger and Coffee Prices to Keep Rising

McDonald's "Menu Prices Up 6% This Year"... Starbucks Employees' Average Hourly Wage Raised to $17

[Image source=AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Prices of hamburgers and coffee in the United States are expected to continue rising. This is because companies like McDonald's and Starbucks are raising employee wages, making wage-driven inflation inevitable.

According to the Wall Street Journal (WSJ) on the 27th (local time), McDonald's stated that due to rising costs, menu prices are continuously increasing, and they expect the price increase rate this year to reach 6%.

McDonald's explained that wages for employees at U.S. stores have already increased by more than 10% this year. Despite raising wages, McDonald's said it is still difficult to find employees. They also forecast raw material cost increases to be between 3.5% and 4%, higher than the previous estimate of 2%.

Chris Kempczinski, CEO of McDonald's, expressed frustration that the improvement in hiring conditions has not met initial expectations, making it difficult to find employees.

Starbucks also announced on the same day that it plans to raise the average hourly wage of its employees, currently about $14, to around $17. Starbucks explained that over the past two years, it has increased employee compensation by more than $1 billion, including wages, but it is still very difficult to find employees, which is the reason behind the wage increase. Starbucks stated that hourly wages for U.S. store employees will rise from a minimum of $15 to a maximum of $23.

Chipotle, a Mexican food fast-food chain, also revealed that the wage increases for employees earlier this year have recently impacted the company's sales. When costs rise, companies seek to maintain profits by raising product prices, effectively passing the burden of increased costs onto consumers.

Food company Kraft Heinz announced a 1.5% price increase in retail and restaurant sectors worldwide to reflect rising prices.

Paulo Basilio, CFO, said he expects to "implement pricing plans to maintain our profitability at the current cost level" next year as well.

James Quincey, CEO of Coca-Cola, also stated at the announcement of third-quarter results that raw material prices, labor costs, and logistics expenses are expected to remain high next year, and he said they will raise prices "if necessary."

Meanwhile, McDonald's announced that same-store sales in the third quarter of this year have recovered to pre-COVID-19 pandemic levels. Compared to before the pandemic, global store sales increased by 10.2%, and U.S. store sales rose by 14.6%.

McDonald's third-quarter net income was $2.15 billion, up 22% year-on-year, and revenue was $6.2 billion, up 14%.