McDonald's Japan plagued by convenience stores

McDonald's Japan plagued by convenience stores

JAPAN - The sales volume and customer base of McDonald's Co. (Japan) keep declining despite the introduction of a new president, as the chain loses ground to convenience stores that have been strengthening their sales of coffee and fast food.

McDonald's said Tuesday that sales volume in September, excluding effects from newly opened stores and other factors, was down 3.4 per cent from the figure in the same month last year. While sales declined for the third consecutive month, the number of customers also dropped by 6.5 per cent, a decline for the fifth consecutive month.

Despite McDonald's new price system, such as raising prices of hamburgers in May and cutting prices of some items in September, it is still struggling to recover from its slump. It seems that its new president, Sarah Casanova, who replaced Eiko Harada in August, has had a difficult start.

The spate of price hikes is a shift away from the company's price strategy of keeping certain items at 100 yen (S$1.30), with the current situation resembling the strategies in the years around 2000 when McDonald's Japan founder Den Fujita was the president.

Back then, McDonald's raised and cut prices repeatedly after it attracted customers with special campaigns, such as a half-price sale on hamburgers. It resulted in a loss of customers. Therefore, it is not yet clear whether the current move will contribute to business recovery.

Furthermore, McDonald's is being forced to fight an uphill battle with major convenience stores.

This year, Seven-Eleven and Lawson installed machines to brew fresh coffee. They also attract customers with sales campaigns such as giving discounts if customers buy coffee together with confectionery, sandwiches or light meals.

McDonald's began carrying out new projects in summer, such as marketing special gourmet hamburgers priced at 1,000 yen, but some experts are sceptical about the impact. "As consumers today have a wider variety of choices, I don't think they feel satisfied or feel they benefit from such marketing campaigns," said Kyoichiro Shigemura, an analyst at Nomura Securities Co.

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