Celebrating 20 years since Big Macs and French fries made their way into the hearts and stomachs of Russians, McDonald's on Monday announced ambitious expansion plans to open 45 new restaurants this year.
"Our Russian division is doing so well that we chose Russia as the top country for reinvestment in 2010," said Jim Skinner, vice chairman and CEO of McDonald's Corporation.
Skinner offered no figures for 2009, saying only that Russia's McDonald's came through with a "terrific" performance, and suggested that 2010 investment would reach at least $135 million.
"If we assume that it costs $3 million to open a new McDonald's restaurant and you multiply it by 45, you may get an idea of how much we want to spend," he said.
McDonald's restaurants have prospered worldwide despite global economic uncertainty, with the fast-food chain reporting a profit of $4.5 billion in 2009, compared with $4.3 billion in 2008, on lower revenues of $22.7 billion, compared with $23.5 billion in 2008.
The company does not disclose its earnings by country, but its turnover in Russia last year was more than $800 million, said Khamzat Khazbulatov, McDonald's president for Russia and Eastern Europe who started his career with the company as a manager at the Pushkin Square restaurant in 1990, Vedomosti reported Monday.
"Russia is one of the fastest-growing [fast-food] markets in Europe, and our three top busy restaurants are here, with the leading position worldwide held by McDonald's on Pushkinskaya Square in Moscow," Skinner said Monday at a 20th birthday party at the Pushkin restaurant.
McDonald's, which opened its doors on Pushkin Square on Jan. 31, 1990, about two years before the Soviet collapse, became a living symbol of the country's transition to a market economy and is widely viewed as the company that blazed the trail for foreign investment to flow into Russia.
McDonald's penetration into the Soviet market sent a clear sign to investors that the situation in Russia was not too bad, said Vladimir Tikhomirov, chief economist at UralSib.
"Pepsi entered the Soviet market long before McDonald's, but still the opening of the first restaurant in 1990 was a landmark," Tikhomirov said. "During the last years of a relatively good economic situation and the strengthening of the ruble, McDonald's has become very accessible to most Russians and has a certain value in the eyes of consumers as one of the transnational brands that links them to Western economies."
Pepsi got the green light to import soft drinks into the Soviet Union in 1972, while the Soviet Union started to export Stolichnaya vodka to the United States in exchange as part of a bilateral deal. Pepsi opened its first local plant, in Novorossiisk, in 1974.
The founder and senior chairman of McDonald's of Canada and McDonald's of Russia, George Cohon, said it took him about 14 years to convince Soviet bureaucrats to allow the restaurant to enter the country.
"First thing we had to do was to explain what McDonald's was, and we encountered pessimism on various levels. Some people told us, 'You'll never make a deal.' And though it took us 14 years, we made it," he said.
He recalled that naysayers also warned him that he would never find the right employees.
"My answer was, 'Tell me, who wins the Olympics? The Soviets! And you think these people will not be able to work in our restaurants?'" Cohon said.
Today the company employs 25,000 people in its Russian restaurants and another 100,000 via suppliers.
In a nod to the recent opening of Russia's first Burger King, McDonald's main rival worldwide, Khasbulatov said his company welcomed competition as a chance to improve its performance.
"I sometimes feel like I am running on a racing track," Khasbulatov said. "It is easy to run when you're all alone, but when there are others running behind you, it is a good incentive to keep your leadership. The presence of other market players doesn't scare us at all."
Burger King, the world’s second-largest hamburger chain, opened its first Russian outlet on Jan. 21, in the Metropolis shopping center, and had plans to open two more soon.
McDonald's operates 245 restaurants in Russia, serving 950,000 customers per day. Worldwide it has 32,000 restaurants in 117 countries.
Recalling the days when McDonald's made its first steps into Russia, Khasbulatov said he would never forget the thousands of customers who lined up in front of the Pushkin Square restaurant for years after the opening.
"The line was there for many years, day and night, despite the rapidly changing political and economic situation, and for me this was a clear sign that we would succeed in this country," he said.
A Moscow Times reporter was among the thousands of Russians who waited in line to get inside the first McDonald's restaurant in February 1990. The visit, a grandmother's treat for a boy's eighth birthday, began by joining the long line in the freezing cold in the early morning. It ended with a smiling attendant handing over the "food of freedom" after dark that evening in exchange for a violet-colored 25 ruble banknote bearing Lenin's portrait. The first trip was followed by many more, but hamburgers and French fries never tasted quite so good.
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