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McD vows to stick with Dollar Menu despite rampant commodity inflation

McD vows to stick with Dollar Menu despite rampant commodity inflation

OAK BROOK ILL. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“We are committed to value,” chief executive Jim Skinner told media representatives immediately after the company’s annual meeting with stockholders May 22. “This is not the time to be moving off of it. We are committed to everyday affordability and have to stick with it.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

During the meeting in a packed auditorium at McDonald’s world headquarters here, Skinner also revealed, to shareholder applause, that the chain quietly had completed a U.S. and Canada rollout of trans-fat-free cooking oil for French fries and other fried foods and some baked goods, following earlier rollouts in other countries. Only cookies and pies still contain trans fats, but they will shed the artery clogger by the end of the year, McDonald’s indicated. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Unlike other quick-service chains that have publicized purges of trans fats, McDonald’s did not promote its changeover to a canola-corn-soy blend. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Also at the press conference, McDonald’s president and chief operating officer, Ralph Alvarez, revealed that nearly 14 percent of the chain’s sales come from its Dollar Menu. Citing the highest rate of food cost inflation he has seen in the past 12 years, Alvarez also said McDonald’s long-term commodities purchasing contracts help offset margin pressures on the lower-cost items. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Alvarez credited the strength of McDonald’s vast supply chain, along with increases in sales volumes, for helping to control costs. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“Even if there is an increase in food costs, if we can stay below inflation, we are doing OK,” he said. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Conceding that the nominally $1 double cheeseburger, McDonald’s best-selling item, is priced above $1 is some markets, Alvarez said: “We are testing different pricing in different marketplaces. We owe it to our operators and ourselves to understand the best value for customers and for them. It’s a balance.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Don Thompson, McDonald’s USA president, cited “aggressive” drink pricing the chain is doing, noting that some cold beverages, including sweet tea and large soft drinks, already are being sold for $1 in some markets, rather than the usual $1.49 or higher. Those discounts will continue through the summer, he indicated. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Thompson said the chain’s previously disclosed systemwide rollout of new beverages is “on track.” That plan includes espresso-based drinks, to be followed by frappes and bottled soft drinks. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“The beverage initiative is also about efficiency in the drive-thru,” he said, hinting that test units are working out some operational kinks before expanding the rollout. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Though McDonald’s executives previously said they expected the beverage rollouts to yield an additional $125,000 in annual sales per restaurant, recent media reports citing unspecified internal company documents indicated that initial, unadvertised test marketing at McDonald’s branches in Kansas City, Mo., and Michigan have generated incremental sales at rates running far below that goal. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

However, corporate and some franchise executives deny there any major problems with the beverage initiative. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Skinner also downplayed a question about fears of flat or declining U.S. sales. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“When you look at our history, we’ve had five years of positive same-store sales,” he said “We had one month of declining sales. You have to take a look at the business in the long term. We are up 2.7 percent year-to-date and are optimistic about the rest of the year. We don’t look at our business on a monthly basis.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

McDonald’s U.S. same-store sales for March fell 0.8 percent, compared with year-earlier results for that month, marking the chain’s first monthly decline in five years. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

During the meeting, a shareholder asked what McDonald’s would do if political problems arise this summer in Beijing during the Olympics, of which McDonald’s is a major sponsor. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“We are proud to be a supporter of the Olympics, as we have been for 40 years,” Skinner said. “We think the political issues should be handled by the governments.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

A couple of shareholders representing consumer activist groups asked what McDonald’s is doing about changing its purchasing away from factory farms and toward humanely raised animals. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

“We are a leader in animal welfare and are paying close attention to this issue,” Skinner said. “Regarding eggs, there is no scientific evidence in one method over the other.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

However, “we are buying more cage-free eggs this year than last year,” he added. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

To a question about whether McDonald’s would ever offer organically raised food, Alvarez said: “We do look at organic. It’s a very, very small industry in the U.S., although it’s growing. Today the supply is not at the point where we could do it.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

After the meeting, McDonald’s completion of its long-delayed oil change provided an opportunity for nutrition activist Michael Jacobson to point a finger at other large chains that still have not purged hydrogenated fats, which are blamed for raising levels of bad cholesterol while lowering good cholesterol, contributing to coronary heart disease. —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

Jacobson, executive director of the Center for Science in the Public Interest, told Nation’s Restaurant News that with country’s largest restaurant chain now having shed trans fats, “any company that isn’t doing it, such as Burger King, really is a laggard that has shown disregard for the health of its customers.” —McDonald’s executives have pledged to shareholders that the chain will stick with its value menu to maintain customer loyalty despite rising commodity and operating costs.

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