Thu, Aug 24, 2006 - Page 12 News List

McDonald's to raise prices on some products

HIGHER COSTS The company said increased costs for raw materials were behind a decision to increase prices for some of its combination meals

By Jackie Lin  /  STAFF REPORTER

McDonald's Restaurants (Taiwan) Co, the nation's No.1 fast-food chain operator, plans to raise the retail prices for several set meals and fries starting next month, citing record increases in raw material costs, according to a press release yesterday.

The change will mark its first large-scale price adjustment within the past few years, the company said.

"The cost of flour has risen 25 percent over the past decade and prices of potatoes and crude oil have also seen drastic fluctuations. Having absorbed these extra costs for some time, we think it's now appropriate to reflect them in retail prices," said Viya Chen (陳薇雅), assistant vice president for marketing and communications, in a phone interview.

Prices of fries will increase by a maximum of 25 percent from NT$20 (US$0.61) to NT$25 for small-sized fries and NT$30 to NT$35 for medium-sized ones.

Four "extra value" meals, including six-piece McNugget and Big Mac meals, will rise by NT$6 each, or at most 6 percent.

To offset the impact, prices will be lowered for four other meals, such as McChicken and rice burger meals, by NT$4 each, the company said.

With 350 outlets nationwide, the company expects that the new pricing policy will reduce its costs by 1 percent.

McDonald's reported over NT$10 billion in sales last year in Taiwan, Chen said, refusing to give detailed figures.

Expressing surprise at the firm's decision, smaller competitors said they had no plans to follow suit for the moment, as they didn't want to scare away customers.

"The pressure is huge, considering that everything from crude oil and soy bean oil to sugar and flour have recorded markups. But we have to take into account consumers' feelings, as most of our buyers are students," said Vivien Ku (古玟禎), public affairs manager of Yum! Restaurants (Taiwan) Co (台灣百勝肯德基), which runs 137 Kentucky Fried Chicken outlets around the nation.

Janus Chen (陳朝慶), president of Mos Burger, said McDonald's price adjustments could be a bit risky, as the public has grumbled about recent utility hikes and gasoline price increases.

He said the Japanese burger chain was reviewing ways to boost revenues in order to reduce the proportion of fixed costs in its financial structure.

Its 108 outlets have reported a 10 percent increase in sales for the first seven months of the year from a year ago, Chen added.

A report released this month by UBS, Europe's biggest bank by assets, said Taipei residents on average need to work for 20 minutes to afford a McDonald's hamburger, putting the capital in the 26th spot globally in terms of purchasing power.

"If demand for McDonald's products falls following the price adjustments, we can say people's consumption capabilities are dwindling. If its sales are not affected, then it's merely part of the inflation phenomenon," said Chen Miao (陳淼), a researcher with the Taiwan Institute of Economic Research (台經院).

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