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Burger King Plans Value Ad Push In June

May 28, 2009: 02:05 PM ET

NEW YORK -(Dow Jones)- Burger King Holdings Corp. (BKC) is turning up the heat in the burger wars.

The “Home of the Whopper” plans to focus more of its advertising message on value items starting in June, several months earlier than expected as the chain tries to recover from disappointing sales amid an onslaught of discounts and coupons from other fast-food chains.

“The current marketplace is demanding value and the company is being responsive to that consumer-driven demand,” Russ Klein, Burger King’s president of global marketing strategy and innovation, said in an email.

With ad rates coming down, Burger King hopes to make a big impression with its value message, though it may be coming to the game a bit late. Some analysts think the chain has lost ground to competitors in communicating lower prices. McDonald’s Corp. (MCD) has its popular Dollar Menu, and Wendy’s, of Wendy’s/ Arby’s Group Inc. (WEN), has its “3conomics” campaign offering three sandwiches at 99 cents each.

Burger King instead has focused on premium products, historically spending about two-thirds of its advertising budget on items like the “Angry Whopper,” a spicy take on its traditional sandwich, with the rest devoted to value products, Barclays Capital analyst Jeffrey Bernstein said in a recent note after meeting with company management. He said that Burger King plans to flip the ratio to lower-priced products like its newly launched miniature hamburgers called BK Shots and its $1 Whopper Jr., with competitive pressure forcing the chain to make the shift two months earlier than planned.

“While we have historically viewed Burger King as being on the offensive in terms of leadership around new products and promotions, it appears management is forced to play defense in order to protect market share,” Bernstein wrote.
Burger King is also cooking up items like ribs and an extra-thick burger on a new batch broiler, planning a big advertising push behind such premium products next year. The sour economy could temper expectations for the impact those products could have in helping the chain stand out, Bernstein said.

With the economy reeling, highlighting premium products has proven difficult as consumers keep a closer eye on their budgets. Some fast-food chains have sought to position their higher-priced items as equal in quality but lower in price to those of sit-down restaurants, which have in turn cut their prices to narrow the gap. Increased couponing and discounting from other fast-food chains have also magnified the disadvantage from lack of a strong value campaign.
Fast-food chains do risk sacrificing their margins and sales if they resort to steep discounts, though falling food prices can make it more tempting for chains to offer such deals.

Still, some have resisted going down that path, saying that it trains customers to buy only discounted products. CKE Restaurants Inc. (CKR), the operator of Carl’s Jr. and Hardee’s restaurants, on Wednesday said that it will continue

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