McDonald's cutting prices in Calif. fast-food battle

December 21, 1990|By New York Times News Service

LOS ANGELES -- The fast-food price wars intensified yesterday in Southern California, where McDonald's said it would introduce a long-term "value menu" of inexpensive items such as 59-cent hamburgers and 59-cent soft drinks.

The menu, to be offered in as many as 360 restaurants here, is the largest such discount offering made by McDonald's Corp.

The announcement was made in Los Angeles by a local group of McDonald's operators and was not identified as a test for the possible national introduction of a value menu. But McDonald's executives said recently that a new pricing plan would be introduced next year.

Chuck Ebeling, spokesman at McDonald's headquarters in Oak Brook, Ill., said he was not aware of the decision made in Los Angeles. He said local operators could and often do make their own pricing and marketing decisions.

Analysts viewed the announcement as a sign that McDonald's might soon introduce a similar menu elsewhere to improve sales at its restaurants in the United States, which are down by C percent this year, to $1.5 million.

The new Southern California pricing strategy, announced by the advertising cooperative of McDonald's operators, intensifies a price war set off by Taco Bell, a subsidiary of Pepsico Inc.

Taco Bell has generated strong sales and earnings growth since last year, when it introduced a national value menu of items selling for 59 cents to 99 cents. Other chains, including Wendy's, have followed suit.

Until now, McDonald's has offered mostly limited-time promotions locally. Analysts say such short-term discounts can hurt earnings and erode customer loyalty.

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