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.

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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."