Chips are down as McDonald's Japan rations French fries

After having to ration McNuggets due to a meat safety scare, McDonald's supplies of French fries are now running thin.

McDonald's Japan said it would sell only small-sized portions of its fries for the foreseeable future starting on Wednesday, citing delays in imports of potatoes due to a labour dispute involving ports on the US west coast.

"If we continued offering fries in sizes other than small, there was concern that some stores will face a shortage of supplies by the year-end or early next year," said McDonald's Japan.

The potato shortage comes as the world's largest fast-food chain, which has more than 3,000 stores in Japan, grapples with a drop in sales after its China-based supplier was caught relabelling out-of-date chicken and breaching other food safety rules.

The company said it had taken emergency steps such as transporting 1,000 tonnes of frozen potatoes by air, and shipping 1,600 tonnes of potatoes using a different route from ports on the US east coast. The shipped potatoes are expected to arrive in late January or early February.

For set menus that include hamburgers and fries, McDonald's Japan said it would offer a discount of Y50 ($0.42) or more. The price of a medium-sized Big Mac meal, which would normally sell for Y669, will now be Y619.

Shipping at US west coast ports has been hampered by industrial action by the US Pacific Maritime Association, which has involved nearly 20,000 dockworkers at 29 west coast ports. Talks have dragged on since May.

Japan has been one of the hardest-hit areas from the labour dispute, given that the country is the largest export market for US frozen potato products.

Other than McDonald's, restaurant chain operator Skylark, which has about 3,000 stores, has also resorted to transporting US frozen potato products by air to avoid a supply shortage.

The potato trouble adds to a growing list of problems that Sarah Casanova has faced since being appointed chief executive of McDonald's Japan in August 2013.

The fast-food chain's sales were already slowing in Japan before the food safety scandal accelerated the trend. For the nine months to December, the company booked a loss of Y7.5bn ($64m) on a 13 per cent year-on-year drop in revenue.

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The emergency measures such as air transport have also lifted costs at a time when Japanese restaurants are already struggling with a rise in prices for imported materials due to the weaker yen.

Skylark said it had no plans to raise its meal prices in spite of the higher costs.

McDonald's said it could not yet quantify the impact on earnings and added that it did not expect a shortage of fries as long as it kept the portions to small, although customers are permitted to buy as many small-sized portions as they want.

Shares of McDonald's Japan closed down 1 per cent at Y2,685 in Tokyo trading on Tuesday.

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