Burger King Focuses On Core As Competitors Try New Lines
August 25 2009 - 4:00PM
Dow Jones News
Burger King Holdings Inc. (BKC) is comfortable testing new
products like smoothies and soft-serve ice cream, but doesn't plan
any big product line extensions like its top competitors are
making, Chief Executive John Chidsey said Tuesday in an
interview.
Burger King's key product innovations comes not with what, but
how it cooks food. In February, the chain plans to begin nationwide
advertising for its "XT Steakhouse" burger, a thick burger cooked
on a "batch broiler" whose capabilities include products like
ribs.
"Innovate around the edges, but to go any further astray, I
don't see the need to do that," Chidsey told Dow Jones
Newswires.
Burger King's top competitors, McDonald's Corp. (MCD) and
Wendy's/Arby's Inc. (WEN), are making big splashes into new product
lines, which they credit for improving sales. McDonald's has
launched its premium coffee line, McCafe, while Wendy's recently
began selling boneless wings.
Burger King, the second-largest hamburger chain in the world
behind McDonald's based on sales, sees its batch broiler as a "game
changer" that it says can blur the line between the food quality at
its stores and that of casual-dining chains.
Highlighting premium products from its batch broiler will come
after Burger King has for the last couple months leaned heavily on
the value switch in its ads by promoting the $1 Whopper Jr. and
offering coupons for $1 double cheeseburgers. The strategy has hurt
the average check but helped to increase traffic from lows hit in
May.
Unemployment has been a big culprit in sales declines,
especially given that it affects Burger King's so-called
"Superfans," 18- to 35-year-old men who eat at burger chains nine
or more times a month, disproportionately. Still, the chain will
continue to try to capture more visits from these customers than
focus on another demographic.
"It's easier to try to get one more visit from them than try to
find lapsed users or other segments," Chidsey said.
Burger King still expects at least another six months of "soft"
sales as unemployment concerns weigh after reporting Tuesday a 2.4%
decline in fiscal fourth-quarter global same-store sales, including
a 4.5% drop in the U.S. and Canada.
Earlier Tuesday, Burger King reported a 16% increase in its
fiscal fourth-quarter profits, helped by a low tax rate and
improving margins. Per-share earnings of 43 cents topped low
expectations, and helped Burger King shares rally $1.21, or 6.9%,
in recent trading, to $18.87.
While withholding fiscal 2010 earnings guidance, Burger King
said it would slow new store openings in the coming year to between
250 and 300, largely as development projects around the world are
delayed.
"We're not going to build on an outer pad without Wal-Mart or
Lowe's being a traffic generator," Chidsey said.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com