McDonald’s China Prices May Rise in Second Half, Fenton Says

McDonald’s Corp., the world’s largest restaurant company, may raise prices at its China outlets in the second half of the year, said Tim Fenton, president for Asia, the Middle East and Africa.

Prices may be raised “toward the third or fourth quarter,” Fenton said in an interview with Bloomberg TV today. “As a rule we look at raising prices anywhere from 50 percent to 60 percent” of the inflation rate.

China’s inflation in January may be 4.9 percent, “lower than the market consensus,” according to Li Jun, a strategist at Central China Securities Co. in Shanghai. McDonald’s, which trails Yum! Brands in number of stores in China, raised prices for its burgers, drinks and snacks in November.

“Our price increase will be modest, it will be lower than the inflationary index to maintain our competitive edge there in China,” said Fenton, who opened a record 165 stores in the world’s most-populous nation in 2010 and plans 175 to 200 new outlets this year. “We’re able to leverage our suppliers.”

China’s statistics bureau, which is due to release January economic data tomorrow, declined to comment on the inflation rate when called.

Inflation in China this year may be 4.55 percent, according to the median forecast of 12 economists surveyed by Bloomberg.

McDonald’s rose 0.5 percent to $76.14 at the 4 p.m. close of trading in New York on Feb. 11. The stock has gained 20 percent in the past year, lagging behind the Standard & Poor’s 500 Index’s 24 percent increase.

There are about 1,300 McDonald’s restaurants in China and the Oak Brook, Illinois-based company aims to have at least 2,000 by 2013. “We have over 50 percent of new restaurant development” for McDonald’s, Fenton said, referring to the Asia, the Middle East and Africa region.

McDonald’s won’t accelerate the introduction of menu items catering for local tastes in China, Fenton said. “We do have various different chicken products that you really won’t find in other parts of the world but the 80-20 rule still applies: 80 percent of our revenue comes from 20 percent of our products.”

To contact the reporters on this story: Susan Li in Hong Kong at sli31@bloomberg.net Anand Menon in Singapore at amenon9@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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