Burger King Promotes Value Offerings

Apparently feeling the heat from value offers from rivals including McDonald’s, Burger King this week is rolling out new ads promoting its $1 Whopper Junior.

Ads from Crispin, Porter + Bogusky that broke this week feature a QVC-like show called KVN with two cackling women awed by the Whopper Junior-or more accurately a guy in Whopper Junior costume. In one spot, the Whopper Junior can’t get through the doorway because he’s too big. “He’s so big he’s stuck!” coos one of the insipid hosts suggestively.

Russ Klein, BK’s president of global marketing, said the company is taking advantage of a “deflationary media environment” to trumpet its value message this month. that consumers have shifted to value-focused consumption: “[Burger King ] will increase its media reach with an emphasis on providing value, beginning in June.”

The effort comes as BK’s stock price hit a high of $24 this year and is now trading at around $17. Last week, Citi analyst Gregory Badishkanian downgraded BK’s stock after Badishkanian noted that BK’s same-store sales had moderated to the negative single digits in late April to early May. Badishkanian blamed a sluggish breakfast business and price pressure. In a research note written after meeting with BK’s management, Barclays Capital analyst Jefrey Bernstein wrote that BK typically spends two thirds of its ad budget promoting higher-priced items and the company plans to flip that ratio two months earlier than it had planned. Earlier this year, BK had singled out higher-priced entries like its Steakhouse XT extra thick burger for a bump in same-store sales.

BK’s pitch will vie with McDonald’s Dollar Menu as well as Wendy’s/Arby’s Group’s “3conomics,” which offers three sandwiches at 99 cents each. Darren Tristano, evp of Chicago research firm Technomic, said all fast feeders seem to be promoting value meals these days, but nevertheless he expects some pushback from BK franchisees. “It cuts into their margins,” he said. “It’s the same thing that happened with McDonald’s when it introduced value meals.” But Tristano said most McDonald’s franchisees are happy with the decision now. “In this economy, you’ve got to be,” he said.