AP NEWS
Related topics

McDonald’s Cuts Prices In ‘Value Menu’ Move

February 20, 1991

CHICAGO (AP) _ A McDonald’s hamburger costs about 20 cents less than it used to in many locales and the ads say it’ll stay that way indefinitely.

The cheaper burger is part of a ″value menu″ McDonald’s Corp. is implementing as it quietly follows the lead of Taco Bell and Wendy’s in lowering prices on selected items and promising they will remain at those levels, as one McDonald’s ad says, ″from now on.″

Another McDonald’s competitor, Burger King, has decided against such a strategy and took issue with the implication that the price cuts are permanent.

But McDonald’s is urging the value strategy on its nearly 8,600 U.S. outlets, more than three-quarters of which are owned by franchisees who do not have to adopt the pricing recommendations.

Corporate spokeswoman Linda Fontana at McDonald’s suburban Oak Brook, Ill., headquarters said she could not provide numbers on value menu participation and would not discuss the strategy in detail.

Marketing managers of McDonald’s regional offices in Albany, N.Y.; Atlanta; Boston; Chicago; Kansas City, Mo.; Milwaukee; Los Angeles; Seattle and San Francisco said most of the stores in their areas have implemented value menus.

All fast-food purveyors have been feeling the effects of a nationwide recession that has cut discretionary spending by consumers. That is one of the key reasons behind the price cuts.

For McDonald’s, most of the price-cutting has occurred since October, when it released quarterly earnings that disappointed investors and prompted a slide in the company’s stock price.

The common markdowns are on hamburgers, cheeseburgers and sausage biscuits to 49 cents, 59 cents and 69 cents, respectively, in small and midsized cities, or 59 cents, 69 cents and 79 cents, respectively, in larger urban areas. Either way, the savings amount to about 20 cents on the hamburger and cheeseburger and 35 cents on the sausage sandwich.

Price cuts on a variety of other menu items are less widespread. The Hamburger Happy Meal, a burger-drink-and-fries combination for children, has been reduced in many markets, along with prices of several other meal combinations.

Almost two-thirds of the 211 McDonald’s outlets in the Albany region feature the 59-69-79 cent menu and the others offer nine items that sell for 99 cents each, which mimics Wendy’s Super Value Menu of seven items for 99 cents.

Albany Marketing Manager Mary Holmes said customers appreciate the savings but she complained that the fast-food industry seems obsessed with value strategies.

″I keep picking up papers talking about value pricing, value pricing, value pricing,″ she said. ″Value to our customers is not just cheap foods - it’s being able to have different items in a convenient location at a good price.″

In the Chicago area, where prices were cut last week, McDonald’s television ads promise that value-priced items will remain at those levels ″from now on.″ The promise is at the heart of value pricing, said Kansas City Regional Marketing Manager Steve Reiff, who was credited by some of his colleagues with being the first to advertise a McDonald’s hamburger priced at 49 cents indefinitely.

″We were telling our customers that today, tomorrow, every day you can get a McDonald’s hamburger for 49 cents,″ Reiff said Wednesday in a telephone interview.

The campaign began in December 1989.

His price-cutting pre-dated Taco Bell’s national introduction last October of a value menu that the Pepsico Inc. subsidiary says prompted a surge in sales last year. Reiff said the competition has sharpened the industry’s focus on fast-food pricing.

″Our owner-operators are more in support of our value program than ever before,″ he said. ″They think it’s the way we need to head in the environment we’re in.″

Burger King, a Miami-based subsidiary of Britain’s Grand Metropolitan PLC, has not joined the value-menu trend, preferring to rely on temporary discounts, premiums and tie-ins such as a recent cross-promotion with U.S. Sprint to build customer traffic.

Spokeswoman Cori Zywotow said value strategies are bound to backfire when the value prices inevitably are raised.

″If you discount an item across the board 365 days a year, that’s what your customers will think it’s worth,″ she said. ″Why would you pay more again in a year?″

AP RADIO
Update hourly