Tue, Oct 30, 2001 page24

• McDonald's dominating Russian fast food market

  RULING SUPREME The first powerful Western investor in Russia, the burger giant has weathered political turmoil, government coups and an economic crisis -- and still turns out a handsome profit

  • REUTERS
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  When American fast food giant McDonald's opened its first Moscow outlet during the final days of the Soviet Union in 1990, thousands of Muscovites waited hours in the bitter January cold to grab a bite of the West.

  Eleven years and 66 million Big Macs later, the prospect of a burger and fries no longer attracts kilometer-long queues, but the Golden Arches still rules supreme in Russia's cut-throat fast food market.

  McDonald's boasts 71 stores in 22 Russian cities, including the original Moscow outlet in Pushkin Square which is still among the busiest McDonald's restaurants in the world.

  "We don't have any serious competitors who can influence our business. Every year we have more and more visitors," Khamzat Khasbulatov, president of McDonald's Russia, proudly told reporters during a recent visit to one of its Russian suppliers.

  The first powerful Western investor in Russia, McDonald's has weathered political turmoil, government coups and an economic crisis -- and still turns out a handsome profit.

  "I can say that we expect to produce 50,000 tonnes of food in 2001, which represents an increase of 25 to 30 percent on last year," Khasbulatov said.

  McDonald's rivals cannot boast similar fortunes.

  Russkoe Bistro opened in 1995, with the brief of selling cheap and cheerful traditional Russian fare. Dozens of restaurants sprouted in prize Moscow locations, boasting an array of meat and cabbage-filled pastries, sweetmeats and kvass, an alcoholic drink made from fermented brown bread.

  Despite the blessing of the Moscow authorities, who took a 44 percent interest in the venture, the chain began operating in the red after the 1998 financial crisis and is now set to be bought up by Moscow catering heavyweight Rosinter.

  Taking the golden arches to the Soviet Union was the brainchild of McDonald's Canadian chief, George Cohon, who took a Soviet Olympic delegation to a McDonald's restaurant during the 1976 Montreal Olympic games.

  The delegation was impressed, and the 14-year-long negotiations to bring burgers and fries to the heart of Soviet Russia began.

  Negotiations to make McDon-ald's the official food of the 1980 Moscow Olympics, however, were a spectacular failure.

  But that small setback is now a mere footnote to Russian burger history. McDonald's can expect its rosy fortunes to continue rising in the long-term, Khasbulatov says.

  "In Russia, only 15 percent of the population regularly dine out. That means we have great potential for the growth in the near future," he said.

  "We have huge plans for our development in Russia. Next year McDonald's is going to open 25 new restaurants across Russia, an investment of around US$40 million," he said.

  The improved economic climate in Russia has also been a boon to Khasbulatov's venture.

  Russia's rehabilitated agriculture sector is now able to supply McDonald's needs locally -- enabling the company to close the farms it opened in 1990 in an exceptional move to guarantee quality.

  "Our business is restaurants and we didn't want to step into another market, but we had to. Fortunately, now we have good partners who are reliable and whom we can trust," Khasbulatov said.

  McDonald's initially produced 50 percent of its ingredients itself, a figure which is now down to 25 percent and still decreasing.

  "Our main goal is to develop local suppliers. We check their production every three months to guarantee quality," Khasbulatov said.

  The burger chain has become so much a part of the Russian scene that even Boris Yeltsin, the former Russian president, was not shy to tuck into a good Big Mac.

  Cohon, who recently wrote a book entitled To Russia With Fries, says Yeltsin, well known for his love of food and drink, once complained to reporters that the hamburgers lacked salt.

  The complaint apparently did McDonald's no harm because Yeltsin's wife Naina bitterly retorted: "It doesn't matter what I cook for that man -- there's never enough salt."
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