š„¤š Dollar Drink Days are DONE
Happy Hump Day everyone,
Our featured story today dives into something that is near and dear to my heartā¦ cheap beverages. Lately Iāve been getting $1 Iced Coffees from McDonalds with the app and been enjoying them so much. It makes getting a $5 latte from somewhere comparatively worse, because in my head Iām thinkingā¦ āMan I could get 5 McDonalds coffees for the price of this one latteā.
Some will debate the quality of the coffee, but I for one, enjoy drip coffee and especially burnt coffee. The kind of coffee you can get from one of those diner carafes, that has been sitting on the burner for too long. That was my first introduction to coffee way back in the day and still the taste I long for. Anyone else dislike fancy third-wave coffee?
Last week we saw the āMinionsā movie set a box office record for the July 4th weekend, Chinese automaker BYD surpassed Tesla in global sales, 50,000 Australians were warned to evacuate because of flooding, China bought 292 Airbus jets, USC and UCLA announced their move to the Big 10, and FTX walked out on their proposed deal with Celsius.
Enjoy this weekās Hump Days!
In the Markets
Featured Story
In 2008, during the worst of the financial crisis, McDonaldās implemented $1 cold drinks during the summer months to keep customers coming to its restaurants as the rest of the economy struggled. After surviving the financial crisis, it seems as though $1 drinks were no match for record breaking inflation following the announcement that many McDonaldās franchises would be scrapping the promotion in favor of the value menu.
As inflation concerns in the U.S. began to grow late last year, McDonalds informed their franchisees that their costs for food and ingredients were likely to see a sharp increase. Food and paper costs were projected to increase by 10%-12% (around $106,000 to $124,000 per restaurant) and labor costs were also projected to go up. As a result, chains reduced their menu of discounted items or shrunk portions to try to improve margins without angering customers.
The tale of McDonaldās is not an uncommon one. Weāve seen countless businesses raise prices or nix promotions citing increased input costs. There are, however, two notable food/drink staples that have somehow been able to keep their prices unchanged. The first one being the essential Costco hot dog which has remained at $1.50 since 1985. The second one being the classic AriZona 23oz Iced Tea which hasnāt budged from its $0.99 selling price since it was first launched 30 years ago.
If youāre interested in learning about Costco, we made a video about their business model and how they make money a while back.
When almost all corporations are raising their prices in response to rising costs and inflation reaching 40-year highs, how so is AriZona able to keep their timeless iced teas priced at $0.99? The co-founder Don Vultaggio had this to say:
āIāve seen inflation before, and itās not a pretty sight for a customer whoās trying to manage their budget. I recognize how important it is, from a manufacturing point of view, to help maintain pricing so consumers donāt suffer the consequences of higher pricesā
AriZona has kept the price the same by cutting costs behind the scenes, not by skimping on quality but by producing faster, using trains instead of trucks, solar panels on roofs, and higher speed machines.
It is sad to see something like the McDonaldās $1 drink, which has for the last 14 years been a sign that summer has arrived, go. Wishing more companies tried to take the AriZona approach instead of resorting to passing the increased costs onto the consumer. Iāll be pairing my Costco hot dog with an AriZona iced tea from now on.
Weekly News Roundup
McDonaldās Dollar Drinks Deal Fades in the Face of Inflation (WSJ)
Some McDonalds locations are axing the chainās U.S. deal offering soda and other cold beverages of any size for a buck as restaurant owners try to fight back against rising expenses. Franchisees ranging from Chicago to Tennessee have boosted the prices for drinks by several dimes and some have chosen to advertise the value menu rather than dollar drinks, in an effort to move away from them.
TC: Noticed this on my roadtrip this past weekendā¦ The end of an era :(
As gas prices are averaging $4.812 nationwide with California and Illinois at $6.244 and $5.325 respectively, Biden issued a tweet on Saturday asking that the price of gas be lowered by āthe companies running gas stationsā. The POTUS account was quickly met with trolls most notably the U.S. Oil & Gas Association (see below).
Housing Shortage Starts Easing as Listings Surge in June (CNBC)
The housing shortage brought upon by slow construction and pandemic-induced demand is starting to ease. Listings jumped 19% in June from a year ago, marking the fastest annual pace since Realtor.com began tracking the metric 5 years ago. Although, overall inventory is still just about half pre-Covid levels. Economists expect the inventory growth to carry on into July.
RH: Austin, Phoenix and Raleigh were among those that saw surges of 100%+ whereas markets such as Miami, Chicago and Virginia Beach saw declines of around 15%.