Oak Brook, Ill., May 22 - McDonald's Corp is willing to absorb some of the higher costs for ingredients like oil, meat and dairy to foster customer loyalty, Chief Executive Jim Skinner said on Thursday.
"This is not the time to be passing that on to consumers. They have long memories," Skinner said after the company's annual meeting.
"We're the value leader. We always have been, and they expect us to continue to be the value leader," he said.
The company's low-price dollar menu, which offers items like double cheeseburgers for $1, has been popular with cash-strapped customers.
The menu drives traffic to stores, and the additional volume has helped protect profits by knocking out some of the pressure from higher commodity costs.
McDonald's has controlled for some commodity cost increases by buying contracts to lock in future prices. It has also offset some of the higher costs by raising its own prices.
Still, the company has not been able to erase the full impact.
"If you just do the math, we don't mitigate all the costs," Skinner said.
McDonald's shares were down 11 cents to $58.67 in midday trade on the New York Stock Exchange.