McDonald's Raises Prices in China

OAK BROOK, Ill. ( TheStreet) -- McDonald's ( MCD) will charge customers in China higher prices for its burgers, drinks and other menu items in an effort to offset higher costs.

The increase "is because of higher raw material prices and we've adjusted our prices accordingly," Sophia Luan, spokeswoman for McDonald's China, told Dow Jones.
McDonalds

China's inflation pushed up to a two-year high at 4.4% in October, leading to higher input costs for the fast-food chain. Premier Wen Jiabao said in a state television appearance Tuesday that China's cabinet is working to mitigate excessive inflation, Bloomberg reported.

>>Restaurant Stocks: Earnings to Watch

McDonald's raised prices on its products by as much as 1 yuan (15 cents) at more than 1,200 of its restaurants in China, beginning Wednesday. The food chain's last price increase was in July.

Luan did not specify an average price percentage increase.

McDonald's plans to have more than 2,000 restaurants in China within the next four years, according to Asia President Tim Fenton.

McDonald's also intends to raise prices in its U.S. and European markets to offset higher commodity costs.

McDonald's ( MCD) did not underscore its revenue success in China, but said earlier this month that comps in its Asia/Pacific, Middle East and Africa region grew 5.3% in October, after pushing up 8.1% in the third quarter.

Yum! Brands ( YUM), which operates fast-food chains under the KFC, Pizza Hut and Taco Bell brands, said comps grew 6% in China in its recent quarter. In the U.S., comps grew 8% at Pizza Hut and 3% at Taco Bell. Comps at KFC fell 8%.
Taco Bell and KFC

>>Yum's Delicious Outlook: China Watch

"We continue to make progress at all three divisions and are especially pleased with the continued strong results from our China business," said CEO David Novak. "The combination of high-return, new-unit development, same-store-sales growth and increasing margins drove operating profit growth of 23% in China for the quarter."

Acceleration in emerging markets like Russia, France and Vietnam, as well as more established European markets seems on track, noted Stifel Nicolaus analyst Steve West. Sales improvement in China should also continue to build.

Yum! said earlier this week it sees strong growth potential for its restaurant concepts in India next year.

>>Yum! Brands Forecasts Growth in India

Comparable same-store sales, or sales at stores open at least one year -- a closely watched metric in the restaurant industry -- should increase in the mid-teen percentages, Niren Chaudhary, chief of Yum's Indian operations, told Reuters at the World Economic Forum's India summit.

Chaudhary expects Yum's Indian operations to break even next year.

"We feel that we have laid the foundation in terms of our business strategy, people capability, in terms of our processes and so on," Chaudhary told the newswire.

"So 2011 is going to be a transformational year in which I personally expect that we will beat all of the metrics of 2010. So we will grow faster, we will build more stores and hopefully get more recognition for the brand," he said.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

>To follow the writer on Twitter, go to http://twitter.com/miriamsmarket.

>To submit a news tip, send an email to: tips@thestreet.com.

READERS ALSO LIKE:



>>See our new stock quote page.

Get more stock ideas and investing advice on our sister site, Stockpickr.com.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

More from Emerging Markets

Wall Street Looks To Extends Gains After Goldman Earnings Beat, China Data

Wall Street Looks To Extends Gains After Goldman Earnings Beat, China Data

China's President Xi Jinping Tells Boao Forum He Supports Opening Markets

China's President Xi Jinping Tells Boao Forum He Supports Opening Markets

U.S. Stock Futures Steady; Asia Stocks Mostly Lower

U.S. Stock Futures Steady; Asia Stocks Mostly Lower

Jim Cramer: There Are Plenty of Shorts in Constellation Brands

Jim Cramer: There Are Plenty of Shorts in Constellation Brands

Renault Shares Hit 10-Year High on Nissan Merger Report

Renault Shares Hit 10-Year High on Nissan Merger Report