This is why big American brands are seeing huge sales declines globally

While many of these brands look to be doing well at home, the picture looks really different abroad

Today, earnings for McDonald’s and Starbucks were released. Being in America, we would expect that all the long lines seen at McDonald’s and Starbucks would result in them doing well in earnings. In reality, these companies posted numbers that will shock you.

McDonald’s experienced a 30% decrease in sales during the pandemic and Starbucks told investors that they’re still struggling during these times. The picture we see at home is very different than what’s been happening everywhere else.

Because the pandemic has taken a huge toll on the world economy, many are cutting back on spending. At home, it seems like people are cutting back less on spending but overseas, where the standard of living is a lot less, the cutback in spending is huge.

For example, in the Philippines, street food is much cheaper than a meal at McDonald’s food. Regarding Starbucks, people see it as a luxury as it’s way more expensive than coffee in other cafes. When times are good, people are able to afford McDonald’s for lunch. For those that have more disposable income, they’re willing to stretch their wallets to buy something from Starbucks.

Since the standard of living makes these goods luxuries, McDonald’s and Starbucks are more elastic in nature in those countries than in the US, where the standard of living is much higher. As the economy took a major downturn, those brands were doing horribly. Meanwhile, the people that sell street food are doing alright.

This scenario applies to many other nations that are in Asia, Europe, South America, and Africa. Because McDonald’s and Starbucks rely a lot on international sales for their bottom-line, any disruptions in the world economy would have a huge toll on them. Since the coronavirus pandemic already impacted many of those economies, sales for McDonald’s and Starbucks took a huge hit.

Altogether, McDonald’s and Starbucks are dependent on international sales to support their bottom-line. As long as wealth is rising globally, then McDonald’s and Starbucks are going to continue growing in the long term. In the meantime, because they’re well-capitalized, McDonald’s and Starbucks will be able to survive the global recession. As many of them focus on their drive-thru and their digital platforms, McDonald’s and Starbucks can continue to do business in a world of coronavirus.