McDonald’s Scales Back Prices in China
http://www.nytimes.com/2009/02/06/business/worldbusiness/06mcdonalds.html
McDonald’s Scales Back Prices in China
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By BETTINA WASSENER
Published: February 5, 2009
HONG KONG — When McDonald’s sharply lowers the price of the Filet-O-Fish sandwich and double cheeseburger in China, one thing is clear: the global slowdown has truly arrived in the once-sizzling Asian economy.
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McDonald’s announced Thursday that residents of China, the world’s most populous nation, would now be able to feast on four new combo McDonald’s meals — the other two feature a chicken filet sandwich and a pork burger — for 16.50 yuan, or $2.41, a cut of up to one-third from the former price.
The promotion, McDonald’s said, is “in line with the government’s direction to stimulate domestic demand” and “help build a stronger economy.” As the economy slows, “we can do our part by helping stimulate domestic demand in the restaurant sector,” said Jeff Schwartz, chief executive of McDonald’s China.
McDonald’s is not the only food retailer to have lowered prices in China Others, like KFC, also have started promotions as consumers in China begin to fret about slowing growth and rising unemployment. But the price reduction by one of the world’s best-known companies highlights how the downturn that began in the United States has changed shopping and selling patterns as far away as China.
Just a year ago, the prices of staples like pork, rice and cooking oil were soaring, lifting inflation and threatening to overheat the Chinese economy, which had recorded double-digit growth for half a decade. Now, with growth slowing to 9 percent in 2008, and expected to be even lower this year, the pressure is on for retailers to entice shoppers with special deals.
Standard and Poor’s, the ratings agency, said on Thursday that it expected China to grow about 6.5 to 7 percent this year and to pick up steam slightly next year, with a pace of 7.8 to 8.3 percent in 2010. And S.& P.’s chief economist for the Asia Pacific region, Subir Gokarn, said he expected consumer price inflation to slow to 1.7 to 2.2 percent this year, from 5.9 percent in 2008.
Still, China remains attractive because of the size of the market and growth rates that are still ahead of those in most of the rest of the world. McDonald’s is planning to expand in China, which is now one of its fastest-growing markets.
McDonald’s opened its first restaurant in China in the southern city of Shenzhen in 1990. Since then, the number of outlets has mushroomed to 1,050, staffed by more than 60,000 employees. Another 175 restaurants are planned for this year.
McDonald’s has been a rare beneficiary of the global downturn, as shoppers around the world switch to lower-priced goods. Last week, the company reported that sales had continued to climb during the last three months of 2008, when nearly every other industry reported a sharp downturn.
