Shop Talk

Retailers, consumers and prices

Check Out Line: Dollar Menu dissected

July 24, 2008

arches.jpgCheck out the demise of the dollar menu as we know it?
 
McDonald’s, dealing with rising commodity costs in the U.S., said it is looking at changes to its popular Dollar Menu, which accounts for about 14 percent of U.S. sales.
 
“What fits on that menu will look different than now because it has to be profitable,” said McDonald’s Chief Operating Officer Ralph Alvarez on a conference call with analysts.
 
“We’ve got to make sure we’re pricing smart, not just pricing low. We’ll make the move at some point,” Alvarez said.
 
The comments from Alvarez come two months after Chief Executive Jim Skinnner said the company was willing to absorb some rising costs in order to ensure customer loyalty.
 
“This is not the time to be passing that on to consumers. They have long memories,” Skinner said.
 
One analyst said the popular double-cheeseburger could disappear from the Dollar Menu.
 
But pegging an offering, or even a business, to the dollar can prove to be a dicey proposal. The dollar has weakened and costs have gone up. Most “dollar” stores, for example, stopped capping prices at one dollar years ago.
 
But analysts do not see McDonald’s straying too far from the dollar.
 
“We do not expect McDonald’s to abandon the dollar price point, but rather evolve the menu with either new products at a near-dollar price point or adjust the pricing of select products that have seen significant cost pressures,” Goldman Sachs analyst Steven Kron said in a research note.
 
Perhaps calling it the “Mighty close (to a) Dollar Menu” would solve the problem. To long? Well, that could always be shortened to “McDollar Menu.”
 
Also in the basket:
 
RadioShack 2nd-qtr profit tops view, sales rise
 
UST profit dips, premium brands weak
 
And the plot thinned… (N.Y. Times)

(Photo: Reuters)

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