Burger King's beef costs fall nearly 25 percent

Burger King Holdings Corp. said its beef costs have plunged nearly 25 percent so far this year as weaker global demand and more supply have sent prices lower.

Burger King is now paying US$46 per case of beef, down from US$61 a case at the beginning of 2009, Chief Financial Officer Ben Wells said at the burger chain's investor and analyst conference. In 2008, Burger King paid about US$45 per case of beef, which makes up 19 percent of food costs for the chain.

The decline is driven by falling global demand as international economies retrench, Wells said. Also, falling dairy prices are putting pressure on ranchers to slaughter their dairy cattle, thus flooding the market with supply for ground beef.

Burger King has also locked in its 2009 chicken contract. Wells did not disclose the pricing, but said it was below a 7- to 8-percent increase that some had feared.

Burger King, the No. 2 US hamburger chain behind McDonald's Corp., sees easing commodity costs as a benefit for 2009, particularly after food costs spiked in prior years.

The chain still has to overcome tighter consumer spending and rising unemployment, which are expected to put pressure on sales, although fast-food chains are faring better than higher-priced, full-service dining chains as consumers trade down.

Wells added that the company remained "very comfortable" with its fiscal 2009 per-share earnings outlook of US$1.44 to US$1.49 a share, which was cut 10 cents earlier this month on an expected hit from a stronger US dollars.