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29.12.2009

McDonald's to target stay-at-home Russians

McDonald's still sees plenty of growth potential in Russia - where more than two thirds of the population are yet to make a habit of eating out -two decades after opening its first restaurant there.

Khamzat Khasbulatov, chief executive of McDonald's Russia, told Reuters the world's largest restaurant company would ramp up Russian expansion next year, opening at least 40 outlets against the 33 planned for this year and 21 in 2008.

McDonald's has 233 eateries in Russia, where a restaurant of any kind was rare before the collapse of the Soviet Union.

"While 70 percent of our population is not used to eating outside the house, we will have a niche that we should be looking at carefully as there are big opportunities to make these people eat out," Khasbulatov said in an interview.

McDonald's will expand mostly in the Russian regions, which are less penetrated by fast-food chains than Moscow or St Petersburg, and would consider launching a franchise scheme to expand beyond the Urals mountains, he said.

Rivals share Khasbulatov's view on the strength of the Russian market. Burger King pledged to open its first Russian restaurant in Moscow this year, while privately owned chain Subway plans to expand its Russian network to 1,000 outlets by 2015 from 78 now.

"We are not afraid of competition. The market is still in the making and one who takes right decisions at the right time will be the leader. We did it 20 years ago," Khasbulatov said.

"When we saw the first queues that were lining up to our first restaurant in Moscow every day and night all year round, our success was predetermined and all we had to do was to develop as fast as possible."

Punters queued for hours to sample Big Macs and french fries when the first Russian McDonald's opened in Moscow's Pushkinskaya Square in 1990.

NO WORSE

Russian consumer sentiment has been hit dramatically by the economic crisis, and the overall restaurant industry will be down 7-8 percent this year, Khasbulatov said.

But McDonald's, which has a 70 percent share of Russia's quick-service restaurant market, did not suffer as much -- fast food chains proved more resilient due to relatively low prices.

"In 2009, we have seen positive dynamics in customer traffic and sales. The average bill was higher than in 2008 although it did not reach what we forecast," Khasbulatov said. "We have no fundamental concerns that the situation may turn for the worse," he said, adding business would be "no worse" next year.

Investment in a single restaurant ranged from $3-$5 million, meaning investment by McDonald's in new openings in Russia would be $120-$200 million next year, he said.

The hamburger chain will also invest a "significant" sum renovating existing Russian outlets, part of its $2.4 billion global capital expenditure plan for 2010 aimed at revamping restaurants and expanding in emerging markets.

Source: Reuters

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