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McD reaffirms value commitment

OAK BROOK Ill. McDonald's will stick with its value menu, despite margin pressures from rising commodity and operating costs, officials said at the company's annual meeting on Thursday. They also said the chain has completed its long-promised rollout of a trans-fat-free cooking oil.

Calling the chain's Dollar Menu its "foundation," Ralph Alvarez, McDonald's president and chief operating officer, said restaurants in some markets have priced a few value menu items with higher food costs, such as the popular double cheeseburger, above $1 in order to make their margins. However, he said, most operators balance low margins on such items with higher margins on other items, instead of raising prices.

“We are committed to value," said Jim Skinner, McDonald's chief executive. "This is not the time for us to be moving off of it. We are committed to everyday affordability and have to stick with it.”

In an address earlier this week at the National Restaurant Association’s convention in Chicago, Skinner cited that “everyday affordability” as “the most important thing right now with our customers.”

With the new cooking oil in use, almost all of McDonald's menu items are trans-fat-free, officials said. The only exceptions are cookies and pies, which the company said would be trans-fat-free by the end of next year.

The new cooking oil is a blend of corn and canola oils, McDonald's said.

McDonald's has lagged behind quick-service rivals, such as KFC and Wendy's, in removing trans fat from menu items. The No. 1 burger chain first announced its intentions to go trans-fat-free in 2002. Since then, the chain has cited supply issues and taste for the delay in rolling out a trans-fat-free oil to its restaurants.

Looking forward, McDonald's said at Thursday's meeting that it would offer value pricing on some beverages more aggressively than in the past. Don Thompson, president of the company's USA division, said sales of sweet tea and iced coffee, which are being served in an increasing number of restaurants, are going well.

Thompson also noted that the chain's test of espresso-based drinks is on schedule.

“Our beverage initiative is also about efficiency in the drive-thru. We are where we want to be,” he said.

About 1,200 units were known to be testing the specialty coffees in early April. McDonald’s corporate office previously said it planned to have the new coffee drinks in all 14,000 U.S. restaurants by early next year, when it will begin adding other beverages, including smoothies and bottled soft drinks.

Officials previously have said they expect that the new beverage initiative would eventually bring in approximately $125,000 per store in incremental sales.

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