The smile on Ronald McDonald’s face seems to be growing thinner as McDonald’s Japan continues to post declining sales for the 12th consecutive month and a 12% drop in operating profits from the previous fiscal year. For the first time since 2008, they will be raising their prices by as much as 25% starting next month.
Hamburger and small shakes prices will rise to $1.22 from around $1, while cheeseburgers and some chicken products will now be at $1.5 from its previous price of $1.22. The price changes are already being tested in the Fukuoka region since January and spokesman Kenji Kaniya said this new pricing finds the “balance between the customer satisfaction and our profitability.” He also explained that the price policy is “demand-based and not cost-based” and is not because of rising material prices.
But no matter how they try to spin the price hike, it all comes back to the fact that sales have been on a steady decline. The company that once was known for its new and innovative products and services seems to have lost that “magic”. Eiko Harada, the president and chairman who came in to McDonald’s Japan in 2004 to revitalize the company, said “The biggest reason behind our failure is our declining creative ability. We have not been able to astonish our customers.”
Their 100 yen ($1) menu and free giveaways don’t have any appeal anymore to customers. Even the “Food in 60 seconds or next burger free” campaign did not click and the free gum and other “unique” freebies for breakfast meals got criticized on social media for being too cliche and trite. Kitaro Tanaka, a journalist closely studying McDonald’s woes said that one of the reasons for the low profits is that their 24 hour stores are being overrun by young people who have turned it into Internet cafes, ordering just the $1 coffee and staying for hours. Also, he observed that Harada, once known as a great business manager with his “Harada Magic” seems to be exhausted, trying to figure out how to turn McDonalds Japan around once again.
[ via Business Week ]