McDonald's price rise points to inflation pressure

HONG KONG Wed Nov 17, 2010 12:18am EST

The golden arches of McDonald's is photographed at the restaurant in Moses Lake, Washington, December, 24, 2003. REUTERS/Jeff T.

The golden arches of McDonald's is photographed at the restaurant in Moses Lake, Washington, December, 24, 2003.

Credit: Reuters/Jeff T.

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HONG KONG (Reuters) - McDonald's Corp (MCD.N) has raised menu prices in mainland China by 0.5 yuan to 1 yuan per item with immediate effect because of rising materials costs as the country grapples with accelerating food inflation.

McDonald's, which has more than 1,000 outlets in China, was raising prices for the first time this year, while Yum! Brands Inc (YUM.N), parent of KFC and Pizza Hut chains, had so far kept prices unchanged, the official Xinhua News Agency said.

"Because some materials prices have increased, we have adjusted menu prices accordingly," a McDonald's (China) Co Ltd spokeswoman said.

She said the increases only applied to mainland China, and its restaurants in Hong Kong and Macau were not affected.

McDonald's move is evidence of rising food prices in China, a key concern among Chinese leaders.

China was ready to take steps to curb inflationary pressures, Chinese Premier Wen Jiabao said after inflation in the world's second-largest economy hit the fastest pace in more than two years, mainly due to rapid rises in food prices.

McDonald's, which had 1,135 stores in China at the end of 2009 and plans to open 150-175 restaurants this year, now charges 15 yuan ($2.30) for a Big Mac.

On Tuesday, McDonald's shares closed 2.09 percent lower, underperforming the Dow's .DJI 1.6 percent fall.

Food-related stocks listed in Hong Kong were generally under pressure, mostly underperforming the Hang Seng Index's .HSI 0.70 percent fall by the midday trading break.

Meat processor China Yurun Food Group Ltd (1068.HK) was down 1.6 percent, consumer food products distributor China Foods Ltd (0506.HK) lost 5.6 percent, while noodle maker Tingyi (Cayman Islands) Holding Corp (0322.HK) was down 2.3 percent.

(Additional reporting by Terril Jones, writing by Lee Chyen Yee; Editing by Chris Lewis)

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