Burger buggers' price hike spin


Daily Telegraph GraphicMcDonald's has been criticised for planned price increases that mean customers in poorer areas will pay more for fast food meals than those in wealthier localities.

The media reported on Thursday that the cost of menu items was previously determined by restaurant overheads, but McDonald's will now use socio-economic factors. McDonald's countered by saying its new demand-based pricing system is simply a matter of giving the customer what he or she wants.

'We really let the customer speak,' CEO Catriona Noble told radio 2GB. 'And that's exactly what customers have the right to do. [They can say] "hey, that price increase is too much for me to handle and I'm going to come to you less often".'

It could indeed be true that customers in lower socio-economic areas are more prepared to tolerate higher fast-food prices than those in wealthier locations. But that is not an excuse for McDonald's to increase prices, and claim the moral high ground at the same time. As South Australian Consumer Affairs Minister Gail Gago pointed out last week, while it is not against the law for outlets to charge different prices, it's not fair either.

Unfortunately McDonald's is not alone in its 'demand-based' pricing policy. Last May, the Southern Sydney Retailers Association (SSRA) discovered that a basket of 28 grocery items was 134 per cent more expensive at Woolworths Greystanes than Woolworths Fairfield.

SSRA president Craig Kelly said: 'It is simply about a lack of competition — at Fairfield, Woolworths has a small independent shopping centre directly opposite them and that keeps them honest in terms of price, but at Greystanes the independents have disappeared and that has allowed Woolies to pump up their prices.'

It's a matter of record that Woolworths and Coles do all they can to suppress competition. The German-owned grocery chain Aldi complained to the ACCC last year that the supermarket giants are using shopping centre lease agreements to prevent Aldi from setting up shop. The covenants require huge rental reductions if a competitor is allowed space in the premises.

Aldi's prices are one third lower than those of its larger competitors. But it has also led the way with a uniform pricing policy for all its 200 Australian stores. Its research discovered that 83 per cent of customers were unhappy with the variation in supermarket prices between suburbs.

The Federal Government is aware of unfair pricing policies, but has so far proved unable to make a difference. It continues to pursue a strategy that places too much trust in the retail giants to regulate their own pricing structures and trading conditions.

The Government set up a GroceryWatch website in order to allow consumers to compare prices. But that failed, and it's now being outsourced to Choice Magazine.

Choice has an outstanding record in consumer advocacy over half a century, but price monitoring is only part of the solution. The Federal Opposition had a point last year when it parodied the government's preoccupation with price monitoring. Instead the government needs to empower and push the ACCC to move against retail giants that are unfairly suppressing competition.

Michael MullinsMichael Mullins is editor of Eureka Street.


Topic tags: mcdonald's, aldi, aldi, Consumer Affairs Minister Gail Gago, demand-based pricing, woolworths, coles



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Existing comments

Consumers have one simple option. Buy prepare and eat your own food at time. It saves money and better for your health in the long-run. Vote with your feet against McDonald's. It is that simple.

Large retail stores are greedy and put up obstacles to stifle competition. The idea of a free enterprise market is simply a myth where it is dominated by a few oligopolies.

Where is the so-called level playing field? It doesn't exist.
Terry Steve | 02 March 2009

The day before the price hike was announced i had a citizen's forum at uni on obesity. As one of the hypothetical spokespersons for the 'Heart Foundation of WA' I suggested we encourage govt to tax McDonald's restuarants in lower socio-economic areas more heavily that in wealthy areas. My thinking was that franchaisees would pass the tax onto the consumer, and thereby reduce this disadvantaged population's demand for these quintiscential high fat foods. I thought such a strategy could help reduce the dispartity in health between socioeconomic groups.

I could take my suggestion as prophetic but it seems that perhaps it is not - given the findings of their market research (i.e that consumer demand in these areas is price inelastic).
Liz | 02 March 2009

It is prefectly possible to eat healthily at McDonald's, the real point is that they are putting prices up EVERYWHERE.

I live in Cremorne, NSW - not Bonnyrigg, or Bankstown. Average house prices are prettymuch 2-3x here. The McDs prices have gone up here, just the same as in those areas.

My bottom line: If it doesn't represent good value to you, don't eat it.
Baps | 06 April 2009


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