McDonald's plans to double Russian presence
Russia, plans to almost double its number of restaurants there over
the next three years - recognising the country as one of the
world's strongest emerging markets and offering opportunities to
suppliers, reports Chris Mercer.
McDonald's announced that it will open 25 new restaurants in Russia this year, with 35 to follow the year after and 45 in 2007. It said its three-year plan would see Big Macs spreading out into new areas of Russia as well as consolidating existing business in major cities like Moscow and St. Petersburg.
The company has already opened 127 restaurants across more than 30 Russian cities since the first 'golden arches' were lit in Moscow, 31 January 1990, on the back of the Soviet downfall.
Now, Russia ranks second out of all McDonald's' markets for the average number of consumers per restaurant. Mike Roberts, president of the corporation, said that Russia finished 2004 as "our leading market in comparable sales and total sales growth".
Ironically, McDonald's' sales growth actually slowed in Russia during 2004, hitting around 18 per cent compared to 24 per cent in 2003. Even so, the country has made a name for itself as a rapidly emerging fast-food market and McDonald's needs to use its head-start over other international retail chains beginning to take more interest.
Swedish baking firm Cerealia Unibake recently announced it would build a factory near Moscow to manufacture a range of frozen and long shelf-life products, including burger buns, baguettes and pitta breads for fast-food restaurants and the foodservice industry in the area.
Soren Landtved, Cerealia's project manager for Russia, said that "every chain we talk to is interested in entering the market", adding that this included McDonald's rival Burger King, and Kentucky Fried Chicken who were already in Russia but looking to expand.
"According to recent market research, half of men and women between 16-50 years-old buy fast food at least once a week," says the US-based School of Russian and Asian Studies (SRAS), adding that many younger people were attracted by the cheaper prices.
Moscow's fast-food market alone is worth between $400 and $700 million and has recovered well from the 1999 national economic crisis with a projected 20 per cent annual growth over the next few years.
The growing fast-food sector will also present more opportunities for domestic foodservice suppliers, though their position is clearly threatened by the imminent arrival of multinational Cerealia. Even so, Russian firm Valentine 2000 already supplies frozen buns to McDonald's and McDonald's alone claims that more than 75 per cent of the raw ingredients it needs are bought from more than 130 independent Russian suppliers.
Consumer health trends are the danger to everyone involved in the fast food industry today. It remains to be seen what effect this may have on the Burger Kings and McDonald's' in the long-term, especially with negative publicity such as the US film 'Super-Size Me'.
But so far McDonald's' broadened menu, including salads and a continuous stream of new products, together with the convenience of its restaurants, are still pulling Russian customers in.