Aftermath of America's Worst Inflation... The Endangered Era of the '1 Dollar Drink' That Survived the Financial Crisis

McDonald's Headquarters Requested Extension Until September
Franchisees Reject Due to Rising Cost Pressures

McDonald's

[Asia Economy Intern Reporter Kim Nayeon] The Wall Street Journal (WSJ) reported on the 1st (local time) that McDonald's in the U.S. is eliminating some promotions that offered carbonated drinks in any size for just $1 due to severe inflation.

According to the report, McDonald's headquarters advised franchisees to maintain this promotion at least until September, but many franchisees in various regions facing rising cost pressures have either stopped or are about to stop it.

Additionally, in 16 franchisee cooperatives across 56 U.S. markets, a vote decided to replace the '$1 drink' promotion with advertisements for other low-priced menu items. WSJ analyzed this as a step toward the abolition of the '$1 drink' promotion.

Although this promotion had survived the 2008 global financial crisis and the 2020 COVID-19 pandemic, it now faces an end due to the worst inflation in 30 years.

In May, the U.S. Consumer Price Index (CPI) surged 8.6% compared to the same month last year, marking the largest increase since December 1981.

Meanwhile, McDonald's headquarters notified franchisees in March that food and paper prices would increase by 10 to 12%, making the burden on business owners a reality.

According to WSJ, McDonald's first introduced the '$1 menu' in 2002, and former President Donald Trump, then a businessman, even appeared in a $1 McChicken advertisement.

McDonald's started the '$1 soft drink' promotion only for the summer season in 2008, expanded the event to all cup sizes in 2010, and made it a year-round promotion rather than a seasonal event in 2017.

Meanwhile, 'Dr. Doom,' the prominent pessimist who predicted the 2008 global financial crisis, Professor Nouriel Roubini of New York University, warned of a complex crisis combining the forms of the 1970s and 2008, forecasting a 50% drop in the stock market.

He stated that the upcoming situation, involving deflation (economic recession) and financial crisis, will not be short or mild. Professor Roubini criticized the view that the upcoming recession will be mild and short as "dangerously naive."

He pointed out that the level of public and private debt relative to global GDP has surged from 200% in 1999 to 350% recently, predicting that the future recession will follow a severe stagflation path.

Professor Roubini warned, "Today, we are heading toward a crisis combining 1970s-style stagflation and 2008-style debt crisis."

He expressed concern, saying, "The current situation is fundamentally different from the early months of the global financial crisis or the pandemic, when central banks could aggressively ease monetary policy in response to reduced aggregate demand and deflationary pressures."

He also forecasted, "During recessions, U.S. and global stocks fell about 35%, but this recession will be accompanied by stagflation and a financial crisis, so the decline could approach 50%," predicting that the stock market will mostly fall without rebounding and the drop could be close to 50%.