Food & Drink

McDonald's Dollar Menu Changes Will Eliminate Fries & Soda, Add Desserts

* Small french fries, drinks to fall off Dollar Menus

* Adding new "Extra Value Menu" from existing items

By Lisa Baertlein

March 8 (Reuters) - McDonald's Corp restaurants in the United States will be tweaking and expanding their promoted value-priced items later this month as many diners remain strapped for cash and the world's biggest hamburger chain works to increase its lead over rivals.

McDonald's will change national advertising for its Dollar Menu, removing small drinks and small french fries and replacing those items with fresh baked cookies and ice cream cones, Neil Golden, chief marketing officer for McDonald's USA, told Reuters in an interview.

Restaurant operators, who bear more of the brunt of higher food costs, often follow suit.

On March 26, McDonald's also will debut an "Extra Value Menu".

That menu will include 20-piece chicken McNuggets, double cheeseburgers, chicken snack wraps, Angus snack wraps, medium iced coffees and snack-sized McFlurries, plus up to four regional options, that were previously listed elsewhere on its menu.

"The choices have been available for quite some time, we're just making it easier for customers to find them and enjoy them," Golden said, adding that the prices on those items will not change. All Extra Value Menu items will be priced above $1 and many will be below $2.

Clay Paschen, who owns 16 McDonald's restaurants in Southern California in partnership with his father and brother, participated in Extra Value Menu testing.

"The Dollar Menu is still king ... and will continue to be a foundation for us. We are using and need both of them to continue our strategies," Paschen said.

In addition to the Dollar Menu and the new Extra Value Menu, McDonald's offers Extra Value Meals.

McDonald's separately has been taking steps to both reinforce its core brand and burnish its image.

To that end, it is promoting its mainstay Big Mac hamburger.

At the same time, it is advertising the fruit and other healthier items in its Happy Meals after sidestepping a battle over its use of toys to market meals to children. Additionally, the company has been running ads about the farmers who provide its potatoes and other ingredients to promote the quality of its food.

McDonald's has a broad menu - including $1 hamburgers, salads, espresso coffee drinks and "premium" Angus burgers - that appeals to a wider range of customers than the young men who typically frequent other fast-food chains.

It uses its massive size to negotiate lower costs for food and other items that its rivals.

All of those efforts put the heat on other fast-food chains, many of which do not have the resources to match McDonald's blow-for-blow, said Bob Goldin, an executive vice president at consulting firm Technomic.

McDonald's U.S. share of the informal dining market was 12.5 percent in November 2011, according to NPD Crest. That was up from 11.8 percent in November 2010.

"They've got their competitors on the ropes," Technomic's Goldin said. "This is where being an 800-pound gorilla is really paying off."

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