Diageo to revamp Burger King after plunge in sales

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Burger King is to expand its range of products after a plunge in beefburger sales as a result of the foot-and-mouth crisis. Burger King, part of the Diageo food and drink conglomerate, is expected to follow the example of arch rival McDonald's and introduce a wider range of chicken-based options such as a Chicken Whopper. It is also planning to offer more limited edition promotions, which have long been used by McDonald's.

The overhaul of Burger King comes as the fast food chain has plunged into loss as consumers turn away from beef. Yesterday, Diageo said trading at Burger King remained "challenging" and that worldwide like-for-like sales were down on last year. The performance in Europe has been particularly poor.

The new management team at Burger King, led by John Dasburg, chief executive, is undertaking a review of the business which will give rise to one-off costs of £50m. Mr Dasburg is due to report to the Diageo board in the next few weeks on how Burger King will be separated from Diageo. There has been speculation of a management buyout, led by Mr Dasburg, with a partial stock market flotation the other possible option. Paul Walsh, Diageo's chief executive, said: "Clearly, financial markets are not particularly disposed to IPOs [initial public offerings] at the moment, but these things change very quickly. I am confident we will have a preferred exit route defined probably by the end of this calendar year for execution during 2002."

McDonald's has also been hit by the beef scare. The US-quoted company warned last month that second-quarter profits will be lower than expected. But McDonald's has a wider range of non-beef products on its menu and has been diversifying by buying stakes in non-burger businesses such as Prêt a Manger, the UK sandwich chain.

Diageo reported a mixed trading update yesterday with strong sales at its Guinness UDV drinks business offset by weaker figures from Burger King and Pillsbury. Drinks brands such as Smirnoff, Johnnie Walker and Guinness have performed well. The Pillsbury business, which is being sold to General Mills, has been hit by a slowdown in recent months. Diageo shares fell 21p to 744p.