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McDonald's cuts prices in Japan

A burger war is heating up in Japan with McDonald's slashing the price of its hamburgers yesterday as rivals contemplate introducing new products to attract customers.

Japan's version of the US fast food chain lowered the price of its burgers to ?59 (US$0.50) from ?80 to benefit customers hit by the nation's economic woes, but analysts were unsure whether the move would be successful.

"This is part of our ongoing campaign to meet diverse customer demands. Amid the current economic slump, cutting prices was one of a variety of requests made by our customers," said McDonald's Japan spokesman Kenji Kaniya.

"We have been introducing a wide range of new products, including a new salad menu and premium coffee. The price cut is one of many strategies aimed at attracting customers," he said.

The latest campaign is more aggressive than an earlier scheme when regular hamburgers were sold for ?65 on weekdays for two years.

It reflects the cut-throat competitiveness of Japan's ?666.7 billion burger industry, 65-percent dominated by McDonald's, analysts and industry people said.

Competition became tougher after mad cow disease (bovine spongiform encephalopathy or BSE) was found last year in some Japanese cattle, discouraging customers from eating beef.

What's the attraction?

"Price cuts alone are not likely seen as a huge attraction among consumers. Continued introduction of new products and new campaigns, coupled with price reductions, will keep their image fresh and attract customers," said Kana Sasaki, food retail analyst at UFJ Tsubasa Research Institute.

"It is difficult to tell how effective the price cut will be in increasing their revenue. There are a lot of uncertainties. We just have to wait and see how things turn out," she said.

An official with the Japanese unit of another major US-based hamburger chain agreed.

"McDonald's once cut prices, but reinstated the regular price, and now they are cutting them again. Exactly what kind of impact the price reduction might bring is difficult to assess," he said, asking to remain anonymous.

"We are not doing anything for now to counter their move," he said.

Kaniya of McDonald's said his company would review its price structure every three months to respond to consumers' needs.

"If our customers support the new hamburger prices, we will keep them. If they do not, we will reconsider our strategies," Kaniya said.

The price of McDonald's cheese-burgers and frankburgers have also been lowered.

A spokesman for First Kitchen, a Japanese fast food chain with 117 burger outlets, said the McDonald's decision reflected the ongoing trend of price competition.

"The price of hamburgers has been falling for sometime now. The price cut [by McDonald's] only adds to the trend," First Kitchen's PR representative Masayuki Suzuki said.

The company was not launching a special campaign to counter the McDonald's move.

"Price competition is important. But what is more important is to differentiate our products from others. Since last year, we have introduced pizza on our menu and different types of french fries," he said

"What we call `menu variation' will be a key to success in this business."
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