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McDonald's chews over growth slump

AUSTRALIA'S love affair with Big Macs might be waning, with McDonald's growth in the region sliced by more than half.

The fast food giant's global chief operating officer, Donald Thompson, described the local market as ''challenging'' and getting worse.

The downturn in sales across its Australian stores has seen McDonald's introduce a range of initiatives, including the launch last month of its ''Loose Change'' menu, which offers a range of items under $2 and its Value Lunch deal.

Releasing its first-quarter earnings results in the US on the weekend, McDonald's said sales at its US stores rose 8.9 per cent, while comparable store sales rose 5.5 per cent in McDonald's Asia, Pacific, Middle East and Africa region (APMEA), which takes in Australia.

Mr Thompson, who takes the reins as chief executive in July, confirmed the tough trading environment in Australia was proving difficult.

''[In] APMEA, we're seeing challenging economic conditions with slow growth in China and ongoing tightening in Australia,'' he said.


''We're managing … with a focus on compelling menu offerings, strong value and convenience. Australia is focused on branded affordability.''

A spokeswoman for McDonald's Australia said the business was still growing, despite the tough trading conditions, but confirmed there had been a slowdown in sales growth. ''In recent years we have seen 2 to 3 per cent growth when historically it has been high single digits,'' she said.

Only a few years ago, following the global financial crisis, Australia was one of the best-performing regions for the restaurant chain. In 2009, the local operation posted sales growth of 6 per cent, nearly double the global rate of 3.8 per cent.

The stronger performance was driven by an image overhaul, including a revamp of its menu to offer healthier alternatives as well as gourmet-style burgers, such as the Angus Burger, that proved a big hit among customers.

The spokeswoman said the local business had shown improvement last month and this month, and the region was expected to match global growth as the year continued.

McDonald's is estimated to have a 46 per cent share of the quick service restaurant category in Australia. It is planning to open 35 stores this year to take its portfolio to 900. Worldwide the company plans to open 1300 stores, up from 1150 last year.

Recent figures from the Bureau of Statistics showed food retailing was flat in February, while seasonally adjusted sales at cafes, restaurants and takeaway food services fell 0.7 per cent.