McDonald's slashes burger prices to lure back Japanese

TOKYO -- In a nation famous for steep prices, one bargain stands out -- the 59-yen hamburger. The special offer, launched Monday by McDonald's Co. Japan, is part of the company's campaign to win back sales devastated by a mad cow scare and other fears about food safety in Japan.

"The cheaper the better," said Ken Inoue, a 32-year-old employee at a computer company, who had two hamburgers, at a cost of about 50 cents each, a teriyaki burger and coffee for lunch at a bustling Golden Arches in Tokyo. "I had two burgers so I'm happy."

Japan has long been notorious for outrageously high prices. But a discount war is intensifying in a wide range of products lately, not only in fast foods, but also in clothing, airplane tickets and household knickknacks, as a long economic slowdown deadens consumer spending.

Hamburger prices in the United States vary from one McDonald's to another, but a burger now costs about $1 in New York.

Previous success

McDonald's, which runs nearly 3,900 stores in Japan and attracts roughly 1.2 billion customers a year, had scored enormous success with a price-cutting campaign on the burger two years ago to 65 yen (55 cents) each.

But McDonald's raised the burger price back up in February, to 80 yen (67 cents) -- at the wrong time.

Cases of mad cow disease, a brain-destroying illness, which began popping up in Japanese cows last autumn, made beef patties an extremely unappetizing option.

Plunging sales

Although McDonald's Japan uses Australian beef, which has not been infected with the disease, sales plunged, dropping about 18 percent some months compared to a year ago.

The aversion to beef was so strong some barbecued beef restaurants collapsed. A series of scandals at other companies over mislabeled meat -- including pork and chicken as well as beef -- broke out about the same time, setting off deep doubts about food safety and pushing families to eat at home.

Especially worrying is the fact that sales at McDonald's haven't picked up, although overall food fears appeared to be ebbing by springtime, said Seiichiro Samejima, analyst at Ichiyoshi Research Institute in Tokyo.

"People could be getting bored with McDonald's food. And that could mean a crisis for McDonald's," he said.

The price campaign is sure to help a little, but Samejima said it was unlikely to fuel a drastic recovery.

McDonald's Japan Senior Vice President Yutaka Kobayashi acknowledged that low prices alone aren't enough to woo Japanese back to burgers and fries. Marketing research shows people simply aren't happy with the McDonald's menu, he said.

"Basically, McDonald's does not see the 59-yen burger as our only weapon," Kobayashi said. "Customer needs are growing more diversified."

McDonald's has begun offering a new menu of salads and soups at about 2,800 stores to attract calorie-conscious women and a better grade of coffee at 900 outlets to respond to customer complaints, Kobayashi said.

McDonald's Japan, which opened its first store three decades ago, went public last year, listing on the Jasdaq market for ventures. Its share price has tumbled from nearly 5,000 yen ($42) shortly after its initial public offering to about 3,000 yen ($25) recently. It is 50 percent owned by McDonald's Corp. in the United States.

Not a permanent change

Kobayashi won't say how much profit his company is making off the 59-yen burger but he insists it isn't taking a loss. He also denies any flip-flopping on pricing and says the lower price will be reviewed after three months.

"We have not changed the price. We're just offering it at a reduced price during this campaign period," he said.