Fast-food outlets beef up burger price war

Fast-food outlets beef up burger price war

By Stevie Emilia

JAKARTA (JP): Despite the government's call for a return to
local cuisine, competition among foreign fast-food outlets is
getting tougher.

On the streets children are saying "beef-beef", mimicking
McDonald's latest advertisement on the private TV stations. The
commercial promotes a huge cut in the price of its beef burger,
from Rp 2,000 to Rp 1,100 (41 US cents) excluding tax.

Most shopping centers display big Wendy's posters offering a
beef burger for Rp 1,000, slashed from its initial price of Rp
1,818 excluding tax.

Could we buy a cheaper beef burger anywhere in the world?

Executives of the two fast-food restaurants hosed down
suggestions of a price war despite the massive discounts.

Speaking to The Jakarta Post recently, the executives argued
that offering cheaper burgers was part of their marketing
strategy.

Bambang Noeryatno Rachmadi, the managing director of PT Ramako
Gerbang Mas, which is the franchisee of McDonald's in Indonesia,
said: "As far as I'm concerned there's no burger war because
McDonald's beef burger promotion was planned a long time ago."

The promotion, he said, followed McDonald's promotion of ice
cream cones, with the price reduced from Rp 1,300 to Rp 500.

"It's just a coincidence that at present another food
franchise is conducting the same promotion as McDonald's,"
Bambang said during a phone call from the North Sumatra capital
of Medan over the weekend.

Cindy Gunawan, marketing manager of PT Wendy Citrarasa, which
holds the Wendy's franchise in Indonesia, said: "There's no
burger war."

"The slashing of our burger's price has already been planned,
tested and is part of our marketing strategy."

The Wendy's promotion started last month and will end next
month, according to Una, one of Cindy's staff members.

Image

According to Bambang, McDonald's beef burger promotion started
last month and would continue for an unlimited period.

"It's intended to boost McDonald's image and increase our
sales and customers as well," he said.

A cheap price was no guarantee that people would buy the
product, he said.

"If the quality is bad people won't take it, even if it's
free."

Customers welcomed the massive cut in the price of a burger.

A student queuing at one of the burger stalls in Blok M Plaza,
South Jakarta, said: "It's cheaper now and we can afford it with
our allowances."

McDonald's opened its first outlet at the Sarinah building on
Jl. Thamrin, Central Jakarta, in 1991.

Up until March 1997, the American food chain had opened 61
outlets in Java and Bali. Its sales last year totaled Rp 165
billion, surpassing the initial target of Rp 120 billion.

McDonald's is trying to reduce its dependence on imported
products. By the end of this year, it is expected to cut imports
from 60 percent, in 1996, to 25 percent.

Wendy's, which began operating in 1991, now has 27 outlets in
Java. Its sales are estimated at between Rp 10 million and Rp 15
million a day from each outlet.

The burger promotion, however, has no effect on other foreign
food franchises, such as Kentucky Fried Chicken.

KFC's brand manager Prisilla P. Handajani said: "Even though
we also sell burgers here, the cut in burger prices made by other
franchises does not affect us because our core business is fried
chicken."

But the discounted prices are giving small-scale burger
sellers, who offer their homemade burgers for Rp 1,500 each, a
hard time.

Sukmadi, who sells beef burgers from a three-wheel cycle in
the Bendungan Hilir neighborhoods, said his daily income has been
halved. Where once he would return home with at least Rp 50,000
in his pocket, he now must survive on Rp 30,000.

"I can no longer reduce the price of my burger unless I want
to go bankrupt," he said.

Sukmadi has sold burgers since 1990 and makes the patties
himself.

Despite the "I Love Indonesian Food" campaign, launched by the
government in 1994, the number of foreign food franchises has
been steadily growing.

Based on data from the Association of Indonesian Franchise
Restaurants, 68 of the 81 franchise restaurants in 1996 were
foreign and located here.

Foreign food has stolen people's hearts, the data showed.

Lukman, a bank employee, said: "The service and ambience is
usually perfect."

However, prestige is the reason teenagers frequent the foreign
food outlets.

A university student said: "Some food sold on the roadside is
quite delicious but eating there is not as prestigious as having
a meal at foreign fast-food restaurants."