McDonald’s Raises China Prices on Higher Costs
Product prices were raised by 0.5 yuan to 1 yuan (15 cents) today at the more than 1,200 McDonald’s restaurants in the country because of higher raw material costs, said Sophia Luan, the Oak Brook, Illinois-based company’s China spokeswoman. She declined to provide an average percentage increase when interviewed by phone today.
Premier Wen Jiabao said China’s Cabinet is drafting measures to counter excessive price increases, according to state television yesterday, and inflation grew to 4.4 percent last month, the highest in more than two years. McDonald’s opened its first 1,000 restaurants in China in 19 years, faster than in any other country outside the U.S., and plans to have 2,000 within four years, according to Asia President Tim Fenton.
“Everybody is getting used to price increases nowadays,” said Zhang Chen while ordering a fish burger and grapefruit tea at a McDonald’s restaurant at the Shanghai International Finance Center. “One yuan or half a yuan isn’t a big deal.”
Big Mac Index
Zhang, a 27-year-old administrative assistant at a financial company, said she didn’t notice the increase in prices. The restaurant raised the price of its cheese burger by 0.5 yuan while a corn cup was 1 yuan more expensive than yesterday.
McDonald’s fell 2.1 percent to $77.42 yesterday in New York trading.
China has the world’s cheapest Big Mac burgers partly because of a weak yuan, according to The Economist’s Big Mac Index as of Oct. 14. The sandwiches cost $2.18 each on average in Beijing and Shenzhen, compared with $3.71 in the U.S.
Big Macs are most expensive in Switzerland at $6.78, according to the magazine’s index, which uses the concept of purchasing power parity that states the dollar should buy the same amount in all countries.
“If consumers see justifications for price increases, such as value and product safety, they will be willing to pay for it,” Vinay Dixit, senior director of Asia consumer centers at McKinsey & Co., said in an interview in Shanghai.
A Chinese consumer confidence index fell in the three months ended September, the first decline in six quarters, on expectations the costs of goods and services will keep rising.
A total of 76 percent of Chinese consumers expect prices will increase over the next year, up from 70 percent in the previous quarter, according to a statement from Nielsen Co. and the Chinese statistics bureau’s Economic Monitoring and Analysis Center today. Concerns about inflation are strongest among rural and first-tier city consumers, the survey said.
China may impose price limits on food and toughen punishment of those found speculating on agriculture futures including corn and cotton, the China Securities Journal reported, citing an unidentified person.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 1.9 percent to 2,838.86 at the 3 p.m. close of trading, the lowest level in a month.
To contact the Bloomberg News staff on this story: Michael Wei in Beijing at email@example.com
To contact the editor responsible for this story: Frank Longid at firstname.lastname@example.org
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.