Following McDonald's, Pizza Hut Makes Its Move...
Competing on "Value for Money"
McDonald's and Pizza Hut have both introduced their own "$5 menu" options at the same time. This move is a strategic response aimed at attracting price-sensitive consumers amid soaring dining-out costs.
On August 20 (local time), The Wall Street Journal (WSJ) reported that McDonald's and its franchisees have agreed to lower the prices of eight popular set menus by about 15% compared to the combined price of individual items. Franchisees who agree to the price reduction at the corporate level will also receive financial support. The reduced prices are scheduled to take effect starting next month.
The new offerings include a $5 (approximately 7,000 KRW) breakfast set and an $8 (approximately 11,000 KRW) "Big Mac and McNuggets set." Last year, McDonald's launched a limited-time $5 set menu, which received a positive response.
Chris Kempczinski, CEO of McDonald's, said during an earnings announcement earlier this month, "The prices that consumers frequently see on the menu board shape their perception of McDonald's value," and pointed out that set menus priced over $10 have contributed to a negative image of the brand. In fact, when the price of a Big Mac set reached as high as $18 at some McDonald's locations last year, the president of McDonald's USA issued an unusual public letter to address the controversy.
McDonald's second-quarter sales rose 5% year-on-year, but visits from its core low-income customer base declined by double digits. CEO Kempczinski emphasized, "It is important to win them back."
Following McDonald's, Pizza Hut Bets on Value for Money
Around the same time, competitor Pizza Hut also decided to lower prices. According to CNN, Pizza Hut is offering a new $5 "Crafted Flats" pizza for a limited time. This strategy targets price-sensitive lunchtime customers, aiming to diversify sales that are currently concentrated after 4 p.m. Aaron Powell, CEO of Pizza Hut, said in an interview with CNN that more than two-thirds of chain pizza sales occur after 4 p.m., making lunchtime "a significant area of opportunity" for pizza chains.
Pizza Hut's U.S. sales in the second quarter fell 5% year-on-year, while Domino's and Papa John's succeeded in rebounding sales thanks to new product launches. R.J. Hottovy of retail analytics firm Placer.ai pointed out, "Pizza Hut has lagged behind competitors because it hasn't communicated as strong a value message as Domino's and Papa John's," adding, "Launching the $5 'Flats' pizza could improve Pizza Hut's value perception and help increase its lunchtime customer base."
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