McDonald’s Japan plagued by convenience stores

McDonald’s Japan plagued by convenience stores

Monday, October 14, 2013 – 09:51

The Japan News/Asia News Network

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.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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