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McDonalds Hikes Japanese Burger Prices And Sales Slide; Now It's India's Turn

Tyler Durden's picture




 

Confirming that while Central Banks may have halted economic logic and reason indefinitely, supply and demand still have some relevance in the real world was today's earlier news that in the aftermath of McDonalds' 20% price hike of basic burgers in Japan three weeks ago, that the company's Japanese same store sales tumbled by a whopping 3.7% in April, a major contributor for the miss in the expected global same store sales for April which came at -0.6%, below Wall Street expectations. One can only guess what the SSS drop would have been had MCD implemented the price hike at the start of the month. One can also guess if the increase in average price offset the drop in sales volume - we will know soon, but just to make doubly sure if what MCD loses in volume it makes up for in price, McDonalds announced that one month after the 20% price hike in Japan, its Indian franchise operator said it too would proceed with a price hike - the second one this year - amounting to 5-6%.

From Reuters:

An Indian franchise operator of McDonalds Corp  may increase prices for the second time this year, responding to rising inflation which, along with an economic slowdown, it expects to temper demand growth for at least the next 7 months.

 

The company, Hardcastle Restaurants, said on Tuesday it could raise prices by 5-6 percent. That follows a 5 percent hike after the government increased the service tax rate in February.

 

"There is pressure and it's a tough environment, no doubt. But inflation is at 8-10 percent so we have to hike our prices," said Amit Jatia, vice-chairman of Hardcastle Restaurants, which owns the McDonalds franchise for west and south India.

Pop quiz: does consumption increase when prices rise? For the S&P500, yes. In India, apparently not.

Consumer spending in India has taken a hit in the past three quarters as rising food prices, meager salary increases and the slowest Indian economic growth in a decade hurt buying appetites for clothes, cars and eating out.

 

With its 1.2 billion people and growing middle class, India is a large market for global chains, though for now most Indians cannot afford to eat regularly in western-style restaurants.

 

The burger chain said its same-store sales remained under pressure and although they would grow, the increase would not be at the 22 percent achieved in the fiscal year ended March 2012.

 

The burger chain plans capital spending of 5 billion-10 billion rupees ($92 million-$184 million) in India over the next 3-5 years, mostly for store expansion, Jatia said, adding India's long-term consumption growth story remained intact.

 

McDonalds has 309 stores in the country.

In other news, with inflation rampant in the world's second most populous country, the local citizens just can't get enough of selling synthetic gold via synthetic CDOs such as the GLD ETF, if it means being able to buy actual physical gold at cheaper prices. Because remember: deflation is just inflation on the sidelines, and the Chairsatan can kill the sidelines in 15 minutes.

 

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Wed, 05/08/2013 - 14:38 | 3542057 SilverIsKing
SilverIsKing's picture

Will need another few months to properly measure the impact of the price hike.  Once the initial shock wears off, I think sales will improve.  McMorons cannot live long without their McDonalds.

Wed, 05/08/2013 - 14:52 | 3542123 Manthong
Manthong's picture

diet soda,,  last week 3/ 11.00 at the beautiful, but nearly empty supermarket in a major metro area

Thiis week .. 4/ 11.00

IMHO,  not  a really good thing because you have to know that the producers spot a good chunk of it to the thinly margined supermarket shelves

I still like a measured bit of aspartame with phosphoric acid,,

But I would rather have a predictable price for the stuff

Wed, 05/08/2013 - 15:04 | 3542172 SilverIsKing
SilverIsKing's picture

3/11.00 or 4/11.00, what size bottles and where is that?  In the NYC burbs you can get 4 (2 liter) bottles of Coke for between $7-$8.

Wed, 05/08/2013 - 15:05 | 3542177 quasimodo
quasimodo's picture

I'm telling Mikey Blommturd on you

 

Wed, 05/08/2013 - 15:33 | 3542265 Boris Alatovkrap
Boris Alatovkrap's picture

What is up for Mr. Bloomberg? He is want to baby sit Amerika and dictate food intake? Hey Mr. Bloomberg, get a life! Keep your hand off my roll of belly fat!

Wed, 05/08/2013 - 15:09 | 3542181 Creepy Lurker
Creepy Lurker's picture

Silver, that's for a 12 pack of 12 oz. cans. Standard price in flyover country. The 3/11.00 is the usual price they do 4 when it's on sale.

Wed, 05/08/2013 - 15:37 | 3542277 Boris Alatovkrap
Boris Alatovkrap's picture

"Flyover Country"...?
Are you also live in Chernobyl?! Maybe we can together get coffee (or karsk) at Cyber Cafe!

Wed, 05/08/2013 - 16:09 | 3542389 SokPOTUS
SokPOTUS's picture

C'mon Boris; I'll buy the Moscow Mules in Copper Mugs with whatever Vodka you like....

Wed, 05/08/2013 - 15:21 | 3542219 Manthong
Manthong's picture

nw burbs of chicago..   retail super

12 oz cans..   48 for 11.00..   

predictible is 36 cans at Sam's or Costco for about 10.00

gas at retail now is ~ 4.25

 

 

Wed, 05/08/2013 - 16:31 | 3542421 HardAssets
HardAssets's picture

If you need a soda fix try a Mexican Coke. Same as they used to make it in the good ole' days in the USA with real sugar instead of cancer causing agents. Naw . . . its not exactly 'healthy' but it'll kill you slower than the USA stuff. They even put it in glass bottles instead of the plastic containers that make your gonads shrink. Soda pop is poison, but I need my fix once in awhile too.

And besides, Mexican CocaCola really tastes good - youll definitely notice the difference.

Wed, 05/08/2013 - 16:29 | 3542473 scam_MERS
scam_MERS's picture

Paid $0.88 for 2L Coke last week (Food4Less, SoCal stores), and got 4 12pk/12oz cans of Coke for $10 at Albertsons on a 3-day special last week. This week Pepsi 2L bottles are $0.88 at Stater Bros. markets here. However, all summer long last year I could buy Pepsi 2L and Coke 2L for $0.69 on sale virtually every week. Haven't seen that price any more now, and don't expect to see it again. More inflation, so even sale prices are higher than ever before. Still, I buy only when on sale and stock up when prices are lowest. I will do without if prices are too high, on anything.

Wed, 05/08/2013 - 16:47 | 3542486 HardAssets
HardAssets's picture

Less people eating 'food' at McDonalds ?

Inflation does have its benefits, afterall.

Maybe people will try to prepare and eat more healthy food from their homes or go to the many small vendors over there..

Wed, 05/08/2013 - 14:39 | 3542058 FL_Conservative
FL_Conservative's picture

They must not have gotten the memo that there's NO inflation.

Wed, 05/08/2013 - 15:41 | 3542287 Boris Alatovkrap
Boris Alatovkrap's picture

Jedi Mind Trick is not work!

Wed, 05/08/2013 - 14:40 | 3542064 101 years and c...
101 years and counting's picture

silly things like food prices are not factored into central printer forecasting.

Wed, 05/08/2013 - 14:45 | 3542067 Dr. Engali
Dr. Engali's picture

McDonald's in India?   Do they serve tofu burgers?  

 

edit....after checking it out maybe we should consider their menu here. It certainly can't hurt the lard asses in America.

 

http://www.indiamarks.com/what-you-can-and-cant-get-at-mcdonalds-india/

Wed, 05/08/2013 - 15:16 | 3542205 SmallerGovNow2
SmallerGovNow2's picture

not a mcD fan anyway but that stuff sounds nasty Doc...

Wed, 05/08/2013 - 15:20 | 3542216 Creepy Lurker
Creepy Lurker's picture

The menu actually sounds really good.

Wed, 05/08/2013 - 15:20 | 3542220 Groundhog Day
Groundhog Day's picture

The chinese will have to go back to fork fried rriech an the indians will have to go back to curry in a hurry

Wed, 05/08/2013 - 15:22 | 3542224 de3de8
de3de8's picture

My sentiments exactly....chicken burgers?

Wed, 05/08/2013 - 17:29 | 3542626 JDFX
JDFX's picture

'...edit....after checking it out maybe we should consider their menu here. It certainly can't hurt the lard asses in America.'

 

Yes, especially as they will get the McShit's for FREE !  

 

WINNER WINNER CHICKEN DINNER !

Wed, 05/08/2013 - 19:01 | 3542901 Manipuflation
Manipuflation's picture

Thanks Dr. E.  That was exactly what I was wondering when I was reading the article and was about to go searching.  Great time saver.

Wed, 05/08/2013 - 14:42 | 3542073 McMolotov
McMolotov's picture

Substitute horse for cow and keep prices the same. That's what we do here in the west.

Wed, 05/08/2013 - 14:46 | 3542100 BLOTTO
BLOTTO's picture

I thought its because they use their Kobe beef in Japan? = expensive$

.

/sarc

Wed, 05/08/2013 - 14:47 | 3542104 Charlie
Charlie's picture

I don't think they sell beef items in India.

Wed, 05/08/2013 - 14:44 | 3542090 Jason T
Jason T's picture

MCD has a 20% net profit margin for crying out loud.. they should be cutting prices of their food.

Wed, 05/08/2013 - 14:49 | 3542111 buzzsaw99
buzzsaw99's picture

execs needs theirz bonuses bitchez

Wed, 05/08/2013 - 16:40 | 3542498 HardAssets
HardAssets's picture

"MCD has a 20% net profit margin for crying out loud.. they should be cutting prices of their food."

It used to be considered 'modern and trendy' to eat the stuff over there. Its been a long time since I ate there, but the highest volume McDs in the world used to be in Tokyo. (I don't know if thats still true today.)

I can't imagine why the Japanese would eat at McDs today, they have far better choices in quick served meals.

Wed, 05/08/2013 - 14:50 | 3542114 prains
prains's picture

They've used up all the glow-in-the-dark meat and now have to go to the open market for sourcing and the chineeeeeese have cornered the rat meat market, the floating pigs already made a great dim sum, so surry

Wed, 05/08/2013 - 15:26 | 3542238 Bam_Man
Bam_Man's picture

The people near those rivers in China had pork soup coming out of their faucets. (Those with running water, anyway)

Wed, 05/08/2013 - 14:51 | 3542121 booboo
booboo's picture

Death by a thousand yen

Wed, 05/08/2013 - 19:47 | 3543015 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

dude, that's like $10

Wed, 05/08/2013 - 14:53 | 3542130 ebworthen
ebworthen's picture

Raise prices, sales fall.

Imagine that!

Markets are functioning on some level at least.

Wed, 05/08/2013 - 14:56 | 3542146 Seasmoke
Seasmoke's picture

i have a bunch of $1 Mcwrapper coupons i can sell them on eBay if they want

Wed, 05/08/2013 - 15:01 | 3542166 Freddie
Freddie's picture

I love Japanese Big Macs with the special Fukashima sauce.

Wed, 05/08/2013 - 15:28 | 3542247 yogibear
yogibear's picture

Just a matter of time before the US sees McD's prices rise 20 or 30%.

The admin, Bernanke  and the fed will spin it as transitory. CNBS and Balloonberg will never report it.

Wed, 05/08/2013 - 15:31 | 3542259 A. Magnus
A. Magnus's picture

Lots of companies are raising prices for items with relatively fixed production costs lately because they are run by douchebag MBAs who think this is still the late 90s and that people somehow have disposable incomes just waiting to be liberated by buying this worthless shit. Unfortunately we will have to wait for the stealing-at-gunpoint gubbermint to default before all of these too-big-to-fail assmunch motherfuckers EVER get their well deserved day on the unemployment line...

Wed, 05/08/2013 - 17:58 | 3542723 RKDS
RKDS's picture

I'll pray for you, my son:

 

Our chief executives, Who art on Wall Street,
Hallowed be Thy names,
Thy profits come, Thy wills be done,
at home as it is in Congress.
And lead us not into prosperity,
but deliver us from freedom.  Amen.

Wed, 05/08/2013 - 15:41 | 3542290 Solarman
Solarman's picture

Either can most Americans eat out regularly

Wed, 05/08/2013 - 15:50 | 3542316 riskarb
riskarb's picture

Elasticity of demand. 0.20 > 0.037

Wed, 05/08/2013 - 15:53 | 3542328 Winston of Oceania
Winston of Oceania's picture

No such thing as a free lunch Ben! Not even McDonalds...

Wed, 05/08/2013 - 18:08 | 3542775 TrustWho
TrustWho's picture

Do you think Bernanke is a ZH-er and reads? I guess Tylers would know.

Wed, 05/08/2013 - 16:05 | 3542366 Hulk
Hulk's picture

McDonalds, Home of the Whopper !!!

Wed, 05/08/2013 - 16:06 | 3542372 SokPOTUS
SokPOTUS's picture

Has there been a Flash Smash in Horse Meat Futures?

Wed, 05/08/2013 - 16:10 | 3542393 roadhazard
roadhazard's picture

L'onald sez, "so solly".

Wed, 05/08/2013 - 16:18 | 3542435 besnook
besnook's picture

there is a little more to it then just a price increase. the price has crossed some threshold of competition with substitutes. it is still pretty cheap to eat in tokyo if your life is in yen(and hopefully getting cheaper in dollars). japanese don't eat on the street so they eat inside the stores. there are a lot of small restaurants that can compete on price and the speed of service with mcds(it is not like the usa where the only competition are other fast food chains) from noode shops to 7/11(where the food is actually attractive) and other quickie stores. mcds may have simply priced themselves far enough above the local market that they have shot themselves in the stomach. they just chased that 3.7% of customers away to the nearest donburi shop.

imported every day products won't be able to compete at all if the yen devalues to 110yen/dollar.

Wed, 05/08/2013 - 18:24 | 3542807 NoWayJose
NoWayJose's picture

I guess the 1% who have enough stocks that they are wealthier after Abenomics are not eating enough at McD's to offset the 99% of people that are being forced to cut back because of higher food and energy costs caused by Abenomics. We have the same thing in the US, with luxury retailers doing well and middle tier retailers getting crushed.

Wed, 05/08/2013 - 18:32 | 3542827 dolph9
dolph9's picture

I grew up on Mcdonalds, but still, fuck 'em.

They can disappear from the face of the planet, never to be seen again, and I wouldn't shed a tear.

Wed, 05/08/2013 - 19:41 | 3543004 robertocarlos
robertocarlos's picture

Why would sales fall? You gots to eat. And Mc D's is a bit better than seaweed.

Wed, 05/08/2013 - 19:54 | 3543039 rsnoble
rsnoble's picture

Passing on costs has reached full circle.

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