The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
28 de Diciembre de 2008 – 2 de Enero de 2009

The World

Adjusting the menu. The restaurant industry is suffering due to the worsening economic situation. In the U.S., for example, between August and November the restaurant industry is estimated to have lost some 36,000 jobs, and half of the country’s consumers say that they plan to “spend less money eating out”. To deal with this situation restaurants are adopting different strategies. A number of restaurants have gone down-market. In some extreme cases we have seen individual high-end restaurants close down only to reopen in the same location with a different name and a different menu. Generally they have moved into the fast casual segment. Of course this has pressured the fast casual segment. In the fast food segment, Burger King and McDonald’s, interestingly, seem to be going in different directions.

Burger King is following what they call their “barbell” strategy. While continuing to offer their traditional menu —one end of the barbell— they have also added premium items to their menu offerings —the other end of the barbell. With the premium items they hope to take some market share away from the fast casual segment as consumers see these new items as a true value option. McDonald’s, by way of contrast, has focused on their Dollar Menu in order “to appeal to budget-minded consumers”. Some analysts, however, expect that McDonald’s will eventually move beyond the Dollar Menu. Right now, not only is the timing not right, but rolling out too many products aimed at different segments would end up confusing their franchisees about the strategic focus.

Mexico

Raising the minimum wage. As the year came to a close the government announced that the minimum wage for 2009 would increase by 4.6 percent. Of course, labor isn’t at all happy. They are saying that the increase is below 2008’s inflation, which means that in real terms their purchasing power has fallen. What is particularly interesting is that the government typically has not tended to use the minimum wage to replace workers’ purchasing power, rather they often try to use it as an instrument to control inflation. Because many administrative prices are linked to the minimum wage, as well as it being an indicator of other prices in the economy, the government has tried, in the past, to hold down the minimum wage to keep overall prices from rising too much. If this is the case again this year, it means that the government does not expect that inflation will significantly retreat in 2009.