Walmart Is Capitalizing On Rising Fast Food Costs

By: Sam Watanuki | Published: May 17, 2024

Walmart has seen a surge in sales as more customers opt for groceries over fast food due to rising prices. John David Rainey, Walmart’s CFO, shared that it’s 4.3 times more expensive to eat out than to cook at home, benefiting Walmart’s business.

This shift in consumer behavior has significantly boosted Walmart’s grocery sales.

Stock Prices Hit All-Time High

Per CNBC, Walmart’s stock reached an all-time high on Thursday, surpassing Wall Street’s quarterly sales and revenue expectations. The company also predicted its full-year results to be at the high end or better than its previous forecast.

A laptop near books open to a stock market graph.

Source: Yorgos Ntrahas/Unsplash

This remarkable stock performance highlights Walmart’s ability to adapt to changing market conditions.

Increased Transactions

Walmart reported a 3.8% rise in transactions both in stores and online in the last quarter. This increase is attributed to more customers seeking cost-effective meal solutions amidst rising fast food prices.

Walmart employee cleaning a self-checkout

Source: Walmart Corporation

The convenience and affordability of Walmart’s grocery offerings are attracting a growing number of shoppers.

Fast Food Chains Struggle

Fast food giants like McDonald’s, Starbucks, and Yum Brands have seen a decline in sales.

A man in shorts ordering food from a fast food worker

Source: Wikimedia Commons

Foot traffic to these limited-service chains fell by 3.5% in the first quarter, with restaurant executives blaming bad weather and a consumer slowdown. The increasing cost of dining out has deterred many customers, driving them towards grocery stores like Walmart.

Customer Perception on Prices

Many customers feel that grocery store items have become cheaper while fast food prices have increased.

Three smiling Walmart employees wearing blue vests, standing in front of a frozen food aisle

Source: Walmart/Facebook

This perception has driven more shoppers to Walmart’s grocery aisles for affordable meal options. As prices at fast food chains rise, consumers are turning to Walmart for budget-friendly alternatives.

Competitive Edge with Bettergoods

Walmart has introduced a new grocery brand called Bettergoods. This premium line caters to health-conscious customers and those with special diets, offering items like gluten-free and plant-based products.

Photograph of a freezer at Walmart full of frozen pizzas

Source: @Walmart3118/Facebook

Seventy percent of Bettergoods’ items are priced under $5, making it an attractive option for cost-conscious shoppers.

Inflation Impact

Inflation data from the U.S. Labor Department shows a stark contrast between the price increase of food at home (1.1% year over year) and food away from home (4.1%).

Source: Nicholas Cappello/Unsplash

This disparity has further encouraged shoppers to buy groceries instead of eating out. The lower inflation rate for groceries benefits Walmart as more consumers seek to save money.

McDonald’s Price Controversy

McDonald’s faced backlash over its prices, with an $18 Big Mac combo in Connecticut going viral. Despite introducing a $5 value meal, the chain reported disappointing same-store sales growth of 2.5%, suggesting a decline in foot traffic.

A close-up of a McDonald’s drive-thru menu seen outside.

Source: Erik Mclean/Unsplash

This controversy highlights the growing frustration among consumers with fast food prices.

Weather and Consumer Slowdown

Bad weather in January and February, along with a slowdown among lower-income diners, contributed to the decline in restaurant sales. This trend has benefited Walmart as more people seek affordable meal options at home.

A woman is shopping at Walmart with her child in a cart

Source: Brandon Bell/Getty Images

Walmart’s ability to provide cost-effective grocery solutions has attracted these budget-conscious consumers.

Successful Fast-Casual Chains

While many fast-food chains struggle, fast-casual restaurants like Chipotle, Wingstop, and Sweetgreen have reported strong sales. These chains have managed to attract customers despite the overall trend.

Front view of a Chipotle Mexican Grill location with a burgundy and cream facade, featuring prominent signage above the entrance under a clear sky

Source: Wikimedia Commons

Their success shows that consumers are still willing to spend on higher-quality dining experiences, even if they are cutting back on traditional fast food.

Walmart’s Marketing Strategy

Walmart’s marketing strategy has capitalized on the rising fast food costs by emphasizing the value and affordability of cooking at home.

Two male Walmart employees, one Asian and one Hispanic, standing at a self-checkout area

Source: Walmart/Facebook

The company’s focus on providing budget-friendly yet high-quality grocery items has resonated with cost-conscious consumers. This approach has helped Walmart differentiate itself from fast food chains struggling with higher prices.

Looking Ahead

As fast food prices continue to rise, Walmart is well-positioned to maintain its sales momentum. By offering affordable groceries and introducing innovative brands like Bettergoods, Walmart is successfully attracting customers who are looking for cost-effective meal solutions.

Customer using a Walmart self-checkout machine to scan strawberries

Source: Shutterstock

The future looks promising for Walmart as it continues to capitalize on this trend.