TOKYO: McDonald's, the fast food chain, is increasing the prices of some products in its restaurants in Japan by as much as 25%, after a raft of marketing schemes failed to generate growth.

"The biggest reason behind our failure is our declining creative ability," said Eiko Harada, the president and chairman of McDonald's Japan. "We have not been able to astonish our customers."

Recent marketing initiatives have included a 100 yen ($1) menu, an offer of "Food in 60 seconds or next burger free", viral videos and free giveaways, including gum and, the latest, a French-fry holder for use in cars.

Breakfast is also being targeted as a priority area, as the restaurant seeks to lure consumers away from convenience stores, where retailers such as 7-Eleven have made inroads into the fast food market.

Analysts have pointed to several reasons for the apparent inability of McDonald's to turn the situation around, including this migration of consumers to convenience stores.

Another is a trend towards home dining, which increased markedly in the wake of the March 2011 East Asian earthquake. McDonald's is addressing this trend by quadrupling the number of outlets that will deliver meals to consumers' homes.

But all its efforts may be in vain if, as local journalist Kitaro Tanaka argued, its business model – drawing in customers with loss-leaders and then having them upgrade to higher priced offerings – has collapsed.

Kitaro also pointed to changing youth behaviour, such as using 24-hour stores as late-night Internet cafes, where they buy one coffee and take up seats for hours, so driving down average customer spend and leading to decreased sales.

"McDonald's has done several things with little success", Mariko Takemura of research firm Euromonitor told Campaign Asia-Pacific. "This [price increase] is just another experiment".


Data sourced from Campaign Asia-Pacific, Japan Daily Press, Auto Evolution; additional content by Warc staff