A McDonald's Corp restaurant in Beijing. The company has about 1,300 restaurants in China and aims to have at least 2,000 by 2013. [Photo / Bloomberg]

Burger chain says increases to be lower than inflation to hold competitive edge

HONG KONG - 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 "towards the third or fourth quarter", Fenton said in an interview on Monday. "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 the number of stores in China, raised the prices of its burgers, drinks and snacks in November.

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"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 on Tuesday, 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 pm 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 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 Asia, the Middle East and Africa.

McDonald's won't accelerate the introduction of menu items catering for local tastes in China, Fenton said. "We do have various 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."

Bloomberg News