McDonald’s is raising prices on many products by 0.5 to 1.5 yuan [US$.08-.16] across China covering main courses, drinks and desserts with changes already begun as of the first of the year.

According to McDonald’s, the main reason for this price adjustment is operating costs and employee expenses, but the set meals with favorable prices including the 6 yuan breakfast and 15 yuan lunch haven’t been changed.

McDonald’s has raised prices three times recently in January, June and October last year with the highest increase of 5%. Moreover, McDonald’s also raised prices in the Hong Kong market with an average growth of 2.3%, which has been officially said to be a result of inflation pressure imposed by the unstable economic environment.

Foreign fast food suffered from a slowdown last year. The same-store sales volume in China of Yum! Brands, parent company of KFC, is expected to decrease by 4% year-on-year during the fourth quarter of 2012. Though McDonald’s announced a 2.4% year-on-year growth rate of worldwide same-store volume in November, the growth was officially said to be owed to the hot breakfast sales in the U.S and the discount promotion in Europe without mention of the huge Chinese market.

“With the increase of rent, raw materials and human capital costs, the profitability of foreign fast food companies has been weakened from extravagant profits to slight profits,” said one food industry insider.

Moreover, as reported in earlier articles, foreign fast food brands also suffer from food-safety issues, which has largely hurt their attractiveness. “Chinese consumers are changing their eating preference to more healthy food,” added the insider.

Source: Morning Whistle Jan 2013

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