McDonald's Plans 2011 Price Increases

OAK BROOK, Ill. -- McDonald's Corp. plans to raise menu prices to blunt higher costs, in what would be its first such increase in the U.S. in more than a year -- a time when the burger chain's sales have thrived amid lower prices, the Wall Street Journal reported.

The company expects to increase prices in the U.S. and Europe amid projections that commodity costs will rise between 2 percent and 3 percent in 2011, Chief Financial Officer Peter Bensen said last week during a conference call in which McDonald's reported a 10-percent increase in third-quarter earnings and noted October sales appear strong.

Timing and executing price increases can be tricky as McDonald's and other companies are caught between paying more for key materials, such as meat and wheat, and keeping prices low to attract price-sensitive customers in a still-weak economy. McDonald's said it has the pricing power to pass on some of those costs, the newspaper reported.

"We'll actively look at the opportunities and with some optimism, the economy will get stronger next year and we'll get price increases," Bensen said.

McDonald's didn't disclose details of the plan.

For the U.S., the higher prices will come after McDonald's so far this year had refused to raise prices in order to take market share from rivals, such as Wendy's/Arby's Group Inc. and Burger King Holdings Inc. McDonald's last raised prices at its U.S. stores in late 2009.

Profits since then have been bolstered by the sales of higher-margin items such as the blended-ice smoothie and frappe drinks, allowing McDonald's to withhold raising prices on other items.