McDonald’s to reduce pace of growth in Russia

The overall investment in expansion will amount to RUB7 billion or US$120m, which is significantly lower in hard currencies compared to last year, when the company invested the same amount of roubles. However, due to the lower strength of the US dollar, this amounted to the equivalent of approximately US$200m.

Experts have said the company is making cuts to the development program in Russia due to the pressure it experienced from the country’s authorities last year. In March 2014, after the annexation of the Crimea by Russia, McDonald’s closed all its restaurants in the peninsula. In a perceived response to this action, the country’s sanitary body Rospotrebnadzor then initiated a series of inspections of the fast-food chain in numerous regions of Russia and temporarily closed 12 restaurants.

The chain was also discredited in the media, in a campaign supported by a number of officials and public persons.

A company source, who wished to remain anonymous, stated that as result of the situation seen last year, McDonald’s, for the first time in 24 years of operation in Russia, achieved only single-digit, rather than double-digit, growth figures. This fact has been partly confirmed by the company’s management.

"This information is close to the truth. There are several factors that explain the slowdown, including the reported slowdown in economic growth which has taken place [in Russia] since the end of 2013, and the negative dynamics of the food industry in the second half of 2014, due to changing consumer sentiments and rising inflation. I think that this year the trend will continue,"​ commented Khamzat Khasbulatov, the company’s president for Russia and Central Europe.

Although McDonald’s has been affected by the problems seen in the wider Russian food industry, its management has admitted that the company also experienced some negative economic impact from the closure of its restaurants, including the largest one in Europe, at Pushkin Square in Moscow.

"Any closure of the restaurants, even for a short period, affects our operation, and here we must note that very popular restaurants have been closed,"​ he said, adding the inspections were also "hampering the operational process".​

However, according to the company’s representatives, all the chain’s restaurants which were closed during the inspections are operating as normal.

That said, it seems the attacks on the company are not at an end as, in March this year, the chairman of the International Affairs Committee of the Russian State Duma, Alexey Pushkov, called on McDonald’s to voluntarily leave the Russian market "in order to join the sanctions of the US President Barack Obama".​ He added that Russian citizens would become healthier if the company were to do this.