McDonald’s is expanding its value meal options, and the impetus is not only to get in on the action; rather, CEO Chris Kempczinski said it was a reaction to “a two-tier economy.” In a CNBC interview, he said there is now a real delineation around mid- and lower-income consumers who are feeling the most pressure; many of them are skipping meals altogether, eating at home, or a combination of both. In Kempczinski’s words, “It’s bifurcating. Wealthier households have shown no signs of pulling back. It’s those mid- and lower-income households that are pulling back.”
The bifurcation has been growing for several years now. Beginning in 2020, some cushion was established across income groups through government relief during the pandemic, but inflation, increased interest rates, and new tariffs has made the gap more pronounced. By early 2025, the wealthiest 10% of Americans were spending half of all consumer spending, reported by Moody’s Analytics. They represented only 36% of consumer spending 30 years ago.
Job growth was essentially stalled across the board, credit card debt has increased among low-income earners, and hardship withdrawals from 401k accounts are on the rise. Vanguard reported an increase in hourly workers tapping into retirement savings just to make ends meet, and the Boston Fed reported household debt levels crossing above pre-pandemic levels.
The Economic pinch pinches the Big brands too
McDonald’s is not alone in witnessing the pullback. Chipotle’s CFO Adam Rymer, noted the similar pullbacks and added lower-income consumers are pulling back, which will be hard to ignore when others raise prices. Retailers like Kohl’s, and casual restaurant brands that depend on spontaneous, casual splurges, have expressed concern as well. According to S&P Global data, non-luxury brands like Amazon, Starbucks, Nike, and Royal Caribbean have significantly underperformed the luxury brands segment, which continues to post strong earnings.
The performance gap highlights a relative imbalance for other brands and performance is commonly referred to as the wider space between the gap. While upscale brands are performing above expectations, the everyday retail and fast food chains are trying to re-acclimate to a new environment. Analysts at UBS expect that McDonald’s new value focus will likely pressure other companies and their branding to respond in kind given what they see as a “difficult macro environment.”
All eyes on jobs report and Fed outlook
Markets are now looking ahead to Friday’s August jobs report, which might not help consumer wallets when released. Christopher Waller, a Fed Governor and prominent authority on monetary policy on the Fed, indicated on Tuesday that he would be surprised if it painted an image of more robust hiring, with analysts prediction just 75,000 net new jobs. This could signal fears of weakening household finances might spread across the economic strata.
Morning Consult Chief Economist John Leer, shared there might be risk that financial pressure could soon “trickle up” to the more affluent consumers. As he expressed, “There are only so many of these very affluent consumers out there,” which would suggest the current imbalance may evaporate if spending is sustained any longer. For now, companies like McDonald’s will do their best to hold onto everyday consumers before the gap grows any wider.
