Moscow -- McDonald's Corp., the world's largest restaurant company, will open nine new restaurants in Russia this year as it marks a decade of serving Big Macs at its busiest outlet worldwide on Moscow's Pushkin Square.
McDonald's was among the earliest foreign investors in Russia, eager to tap a new market of 150 million people. When the first restaurant opened in 1990 on Pushkin, thousands of Muscovites and tourists from across Russia waited for hours in lines snaking down central Moscow's Gorky Street, now known as Tverskaya. The restaurant still serves an average of 20,000 customers daily, making it the world's busiest McDonald's.McDonald's has kept them coming through wars and coups d'etat, bank failures and ruble devaluations, with a combination of price cutting and local sourcing. A Big Mac in Moscow now costs 39.5 rubles ($1.38), down from $2.10 in 1990. In London, a Big Mac is $3.23, while in Prague it's $1.54. In the latest crisis, the ruble's fallen 78 percent against the dollar in the past 16 months.
"We saw a drop in sales of about 25 percent, but now we are reaching pre-crisis levels again," said Glen Steeves, managing director of McDonald's Russia. "We're going slowly, but with such a huge market the possibilities are unlimited."
The company, which has invested $140 million in Russia so far, keeps prices low by buying 75 percent of its food locally. It buys supplies from Russian companies such as Belaya Dacha, which grows lettuce and produces pickles, and Russian slaughter houses, as well as U.S. companies Coca-Cola Corp. and Cargill Inc.
McDonald's $45 million food processing plant near Moscow supplies meat and pies to its 52 Russian restaurants as well as 17 other countries including Germany, Austria, Poland and Ukraine.
When the ruble initially plunged, the restaurants also offered cheaper, locally made traditional Russian items such as soup and cabbage salad.
Luba Zorieva, a 39-year-old social worker, can afford to take her son Vanya, 9, to the flagship McDonald's store for a Happy Meal, which includes a toy and costs 62.50 rubles ($2.20), once a month.
"Everything is tasty and my son loves the toys," Zorieva said, while Vanya was entertained by clowns in Russian costumes. "This is a way to do something nice for the kids."
George Cohon, senior chairman of McDonald's in Russia, was named "Capitalist Hero of Labor" by Moscow's Pravda newspaper in 1990 after he was finally allowed to open the first McDonald's after knocking on bureaucrats' doors since 1975. Once he opened it, his biggest task was in teaching sour-faced Soviet staff to smile.
"It was the height of the Cold War and it was a direct conflict between Karl Marx and Adam Smith," Cohen said. "Since then, the entire thought process has changed and it's much easier to do business."
To accelerate expansion, the company wants parliament to introduce laws simplifying taxation and regulating franchising, which it hopes to introduce in Russia in about three years.
The company, which employs 5,000 in Russia, encouraged the burgeoning middle class by promoting managers from behind cash registers. Among them was Khamzat Khasbulatov, who started as manager of the Pushkin restaurant and is now president of McDonald's in Russia.
Students employed part-time at McDonald's in Moscow earn a starting salary of about 20 rubles (70 cents) per hour.
(C) 2000 Bloomberg News