Dollar deals and drive-thru coffee lift McDonald's NZ sales

McDonald's NZ's dollar deals, drive-through coffee lift 2014 sales; profit unchanged

By Jonathan Underhill

June 15 (BusinessDesk) - McDonald's Restaurants (New Zealand), the local unit of the world's biggest fast-food chain, lift 2014 sales by 2 percent as dollar deals, a Monopoly promotion and drive-through coffee attracted customers. Profit was little changed as the company paid more tax.

Profit was $30.75 million in calendar 2014, from $30.71 million the previous year, according to the Auckland-based company's annual report. Revenue, which is made up of company-owned restaurants and fees paid by franchisees, rose to about $221 million from $216.6 million.

McDonald's has 164 restaurants in New Zealand, of which about 80 percent are owned and operated by franchisees. As well as sales from its own outlets, the company garners monthly service and franchise fees, and a contribution to advertising and rental payments, all based on a percentage of gross sales, from franchisees. Patrick Wilson, McDonald’s New Zealand managing director, said the company is on track to open four outlets this year. Its focus is primarily on Auckland, because of population growth, and on Hamilton as a satellite of Auckland, and it keeps a watching brief on Christchurch as the city is rebuilt, Wilson said.

"The category is buoyant and growing. We saw that at the end of last year and into this year," Wilson said. "There's a lot of competition - on price specifically. For us it continues to be very competitive but we feel very confident we're winning our fair share of that market."

This year, McDonald's is trialling kiosks with "iPad-like screens' at five restaurants, allowing consumers to customise their burgers with ingredients such as guacamole, eggs, mushrooms, two types of bacon and leaf lettuce. Wilson said results so far are positive although no decision has been made yet on whether to roll out the kiosks further. The company's core menu remains its biggest seller, led by the Big Mac, cheese burger and fries, he said.

The New Zealand business paid a dividend of $30.5 million last year, down from $32.4 million in the previous year. Wilson says its New York Stock Exchange-listed parent typically gives a recommendation on the level of dividend payment, which is then ratified by the local board.

The local company struggled to keep a lid on costs in 2014, especially for beef trim which goes into patties, because a shortage of beef in the US has driven up prices worldwide.

"They (beef prices) keep increasing. It seems to be that it's not a temporary shift," Wilson said.

McDonald’s New Zealand purchases about $180 million a year of raw materials for its local restaurants, but exports twice that amount - $360 million to other McDonald's businesses around the world. It accounts for about 10 percent of New Zealand's beef trim exports.

For McDonald’s NZ itself, the cost of raw materials and consumables rose to about $43.9 million in 2014 from $43.5 million in the previous year. Wage costs rose to $46.8 million from $46.6 million.

(BusinessDesk)

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