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THE huge headline covering the front page of yesterday's New York Post summed it up: IT'S
McWAR, it screamed, as McDonald's executives tried to convince their 12,000 American outlets to
sell a Big Mac at a loss-leading 55 cents.
In Miami, at the headquarters of Burger King, owned by Britain's Grand Metropolitan, the men and women who had successfully plotted the Whopper's rise at Big Mac's expense were keeping quiet. They said they would not respond to McDonald's price cuts even though industry analysts felt that they would eventually have to. Internal McDonald's documents speak of an "overt competitive attack by BK". Burger King's latest TV adverts, for instance, feature a young man singing the praises of the Whopper until, uncertainly, he seeks reassurance that few people will see the video just as the camera pulls out to show that he is wearing a McDonald's counter-staff cap. Such tactics have been paying dividends for Burger King, a chain that a decade ago, when it was part of the Pillsbury group, was in dire straits. The Grand Met takeover changed all that and last year Burger King sales in the US rose by 2.6 per cent while McDonald's fell by an estimated 3.3 per cent. Burger King has also scored by assaulting the take-away breakfast market with new products and cost-cutting, and succeeded in getting a health-conscious image far earlier than its rival. McDonald's immediate task is to convince its outlets, more than 9,000 of them owned by independent franchise-holders, to go along with the 55-cent Big Mac, which may or may not be below the cost of actually assembling and frying the burger, though the exact figure is one of those closely guarded fast-food secrets. But the 55-cent tag is misleading: the burger will be available only if the customer buys "French fries" and a drink, likely to push the total beyond $3 (£1.88). Richard Martin, an industry analyst and an executive at Nation's Restaurant News, said: "McDonald's has created an oversupply of restaurants and built too many. Now they're cannibalising themselves." Other analysts point out that price cuts in the dog-eat-dog world of the hamburger are nothing new and that many US consumers are now more concerned with a healthy diet than cost. |