Does The McRib = McRecession?

Retirement, Income, Tax & Estate Planning.

Does The McRib = McRecession?

December 10, 2020 Newsletter 0

Those of you on a low-fat, low-carb, or low-sodium diet, stop reading now.

Did the rest of you see where McDonald’s is bringing back the McRib? If you hadn’t, well… now you have. And if you subscribe to one of the weirder theories on the Internet (and THAT’S saying something), you might be preparing for a recession.

Why? Well, legend has it that McDonald’s only buys the pork necessary for the McRib when the pork market hits a low. By extension, the appearance of the McRib is considered a signal of a pending market downturn. There is some truth to this, but it’s not earth-shattering… and it’s not a sign of a forthcoming downturn.

Let’s look at the history. McDonald’s launched the McRib in 1981 on its national menu. It was never a popular item… for a number of reasons (pork not being as popular to Americans as beef and chicken, and the suspect quality of the sandwich itself, just to name a few). Ultimately, in 1985 it was removed as a permanent menu item. Since then, it has appeared regionally on a seasonal basis practically every year since then, with a few national releases here and there. And while, yes, the McRib has been reintroduced right before some big financial downturns—1988, 2000, 2009—it has also reappeared in plenty of good years.

A sure-fire harbinger of doom it is not (except maybe for your waistline and heart).

But, the legend does hold a glimmer of truth. McDonald’s always launches the McRib in the fall or early winter, when pork is traditionally at its lowest price in the annual cycle. They do this as a sort of arbitrage. That is, taking from one market at one price and selling in another market at another price. It’s an easy financial trick if not one that’s hard to time correctly. At its best, arbitrage provides a slim profit margin. In other years, the McRib serves as an underpriced loss-leader in the hopes that it will sell more profit-friendly fries and drinks. But it’s never a guaranteed signal of a pending financial downturn.

Tune in next week when we dive into the sordid royal history and questionable lineage of the so-called Burger “King”… (not really).