Fast-food feeds two-speed woes

Simon Canning and Nicolas Perpitch
July 25, 2012
The Australian

FAST-FOOD outlets are quickly becoming the measure of Australia’s two-speed economy as consumers demand value meals as comfort food.

Stretched by mortgage repayments and an economy they don’t entirely trust, consumers are keeping their wallets closed and instead treating themselves with the coins lingering in their pockets.

Yesterday McDonald’s reacted to a slowdown in sales with a menu aimed straight at the frugal consumer, saying it would grow its value offerings with burgers and fries priced at as little as $1 or $2. The strategy was a major reason for the company’s turnaround in the US, where the adoption of value meals helped to lift sales and profits four years ago.
Australia bagged a rare mention by McDonald’s executives when the company announced its global results and a 4.5 per cent drop in earnings.

Newly appointed chief executive Donald Thompson said lower consumer confidence around the world as well as higher costs was driving the new strategy.

Barry Urquhart, a retail analyst with Marketing Focus, said that the emphasis on value was a reflection of people seeking cheap comfort.

“People might be better off, but they don’t feel it,” Mr Urquhart told The Australian. “It is playing strongly into the fast-food industry as a no-guilt purchase. It’s a spontaneous purchase that you don’t have to budget for.”

KFC has “Streetwise Meals” and Hungry Jack’s the “Penny Pinchers Menu”. At Perth’s busy William Street McDonald’s, the 30c soft-serve cones were the most popular on the Loose Change menu. Construction worker Kieren Wright, 29, from Ireland, bought himself one. “It’s cheap and nice. It’s the cheapest thing you’ll get in Australia.”

Daniel Curran, 22, could not resist a couple of 10 Pack McBites, at $2 a pop. “It’s handy and it’s cheap,” Mr Curran said. “You just come in quick, and that’s lunch.”

McDonald’s Australia managing director Catriona Noble said customers’ needs were changing.

“Definitely, consumers are being more careful, more savvy, and we’ve got to work a lot harder to really look at what is it that our different consumer groups want,” Ms Noble said.