030137 McDonald's Chief: Price-War to Continue

McDonald's new chief executive signalled no let-up to the bruising price war in the US fast food market, backing the fast food giant's controversial "dollar menu".

Jim Cantalupo, who replaced Jack Greenberg at the start of the year, also endorsed McDonald's "Made For You" system of made-to-order burgers blamed by some critics for falling standards in its US restaurants. But he said the system would be tweaked to deliver fresher and better-tasting products.

Mr Cantalupo added that McDonald's would not provide quarterly earnings guidance for 2003, echoing a recent move by Coca-Cola.

In his first conference with analysts, Mr Cantalupo outlined a back-to-basics strategy with a focus on reversing the decline in sales.

Some more of its restaurants would close, he said, but gave no numbers.

"The model isn't broken," he said. "It is our execution of it that needs to improve. We know our most profitable and efficient source of growth is improving sales in our existing 30,000 McDonald's restaurants."

But the new chief executive's comments may disappoint some analysts and investors who had called for more sweeping changes at the world's biggest fast food chain. McDonald's shares were down 4.4 per cent at $15.96 at the close in New York.

Mr Cantalupo, 59, was named as successor to Mr Greenberg, 60, last month after two profits warnings in three months and falling earnings in seven of the previous eight quarters.

The McDonald's veteran said a "value" menu was an important part of its strategy. But he would examine whether "premium" products such as McDonald's Big 'N Tasty burger similar to rival Burger King's Whopper should be part of the dollar-per-item menu it launched throughout its US chain last October.

Burger King has recently responded by offering its Whopper at 99 cents, for a limited period.

Mr Cantalupo also said he recognised that McDonald's had "taste and speed-of-service issues". But Mr Greenberg's Made For You system, which involved a $180m refit of McDonald's kitchens to enable it to make products to order rather than in batches in advance, was the right way to go.

Charlie Bell, the high-flying Australian executive who has been appointed chief operating officer and is seen as heir apparent to Mr Cantalupo said McDonald's needed to make its restaurants more "relevant" to customers' needs.

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