McDonald’s Stock Looks Very Iffy Due to Millennial Eating Habits

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Mcdonalds in DC
Washington DC, USA-January 19, 2015: This McDonald's fast food restaurant was spotted in Northwest Washington DC on Wisconsin Avenue at dusk. The neon sign is advertising McDonald's Lovin It slogan changed to Lovin DC.
Mcdonalds in DC
Washington DC, USA-January 19, 2015: This McDonald’s fast food restaurant was spotted in Northwest Washington DC on Wisconsin Avenue at dusk. The neon sign is advertising McDonald’s Lovin It slogan changed to Lovin DC.

The millennial generation is really an enigma. It really is. This is one very puzzling generation.

Take their housing habits, for example. Previous generations of Americans follow the typical pattern. Parents raise their kinds until they’re eighteen and kick them out by either sending them to college or just simply telling them to shift out. These kids would then rent and form households, which would stimulate the economy. They would get jobs and eventually they would buy their own homes, which stimulate the economy even further. As they move up the income chain, they trade their home for bigger and bigger houses until they eventually retire and live in a good home.

This is the typical American life cycle. This is why the American economy is so vibrant. There is a built-in household formation mechanism that turns on at the age of eighteen. Once the kids turn eighteen, they become full market participants.

The millennials don’t fit this pattern. There are many millennials living in their parents’ basements, and these millennials are already in their late 20s. Some are even getting close to their mid-30s. They don’t show any signs of moving out or starting their own households regardless of how much money they make. This is why a lot of analysts are worried about the US housing market because it seems that there is no refreshing new wave of home buyers who would keep the wheels of many local housing markets spinning.

Well, in the world of fast-food and restaurants, the picture doesn’t get any brighter. Millennials have very interesting eating habits. If you’ve been paying attention to McDonald’s (NYSE:MCD) stock and why it has traded sideways or declined for a relatively long period of time, it’s due largely to low or stagnant same-store sales in the United States. Thanks to the millennial generation, less and less people are eating at McDonald’s. Millennials don’t really see much value in the stuff they eat at McDonald’s. They would rather eat at casual dining places that pay more attention to ingredients and cooking processes like Chipotle (NYSE:CMG).

You might think that this is a simple matter. You might think that McDonald’s just need to copy Chipotle and capture the millennial generation. Not so fast.

You have to understand that millennial generation, to complicate things, is split into two. There’s the younger millennials who are aged 24 and younger and the older millennials who are aged 25 and older. The most frustrating thing as far as McDonald’s and other big fast-food chains are concerned is that these two millennial age groups have actually different eating habits. Regardless, both these eating habits converge on a trend away from McDonald’s and a trend towards other types of restaurants.

All told, millennials, as a whole, are making fewer visits to fast-food restaurants. Talk about a headache. McDonald’s definitely has its work cut out for them if it’s going to seriously and successfully rebrand itself in the millennial age.

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