McDonald's Pushes The $1 Soda

One dollar for any soda, any size. That is part of the McDonald’s (MCD) plan to get customers to flock to its stores this summer.

Coca-Cola (KO) and McDonald’s management are trying to get the fast food company’s franchisees on board with the unusually low price that will cut the profits on soda which is a big money-maker at McDonald’s outlets. According to The Wall Street Journal, “McDonald’s also wants the $1 drink promotions to run 150 days”, beginning at Memorial Day.

The plan is another example of how McDonald’s uses it huge store chain, which numbers more than 10,000 in the US, and its large marketing budgets to thrash is competition including Burger King (BKC) and Yum! Brands (YUM). The smaller fast food chains may have to match McDonald’s to keep market share.  Their margins are not as high as McDonald’s and they cannot afford the advertising expenditures required to get the word out about special discounts to most  fast food consumers in the US.

The weight of McDonald’s pricing strength and the diversity of its menus can be seen in the company’s earnings and same-store sales which were up over 4% last month. During the last two years, McDonald’s shares are up well over 20% . Burger Kings are down 25%.

McDonald’s will almost certainly lift its store traffic this summer with $1 sodas. And, its competitors will lose some of their traffic, which has been the trend for some time now.

Douglas A. McIntyre