US Fast Food Chains Banking on Russian Bellies

Iconic US eatery McDonald’s has announced it could widen its presence from Russia’s western exclave of Kaliningrad to eastern Siberia in a race to satisfy what industry experts describe as a growing Russian appetite for American fast food—politics be damned.

"It continues to reinforce the message that while there may be some negative rhetoric about America coming out of the political realm, Russians like American products,” said Ed Verona, president of the US-Russia Business Council, a Washington-based trade association comprised of American and Russian companies.  

McDonald’s, which currently operates 357 restaurants in 85 Russian cities, plans to open at least 150 new restaurants in Russia over the next three years as well as possible franchised restaurants in Kaliningrad and Siberia, Khamzat Khasbulatov, head of the company’s Russian operations, told a news conference last week.

The fast-food market in both of these regions is currently dominated by the US sandwich chain Subway and KFC, whose parent company, Yum Brands, announced earlier this month that it planned to open between 60 and 70 new restaurants in Russia and other former Soviet countries.

Yum Brands said it plans to nearly double the number of its restaurants in the region to around 400 by 2015, with the goal of pushing annual revenue to $1 billion.

Subway and the hamburger chain Burger King have also announced plans in recent years to seize a greater share of Russia’s fast-food market, which Euromonitor International estimates at $8.7 billion, the Russian business daily Vedomosti reported last week.

McDonald’s, which came to Russia in January 1990—two years before the collapse of the Soviet Union—had 43.3 percent of the Russian market in 2011, followed by KFC at 6.1 percent, Subway at 4.1 percent and Burger King at 3.3 percent, according to Euromonitor International data cited by Vedomosti.

Subway, which first opened its doors in Russia in 1994, currently has more than 400 restaurants across the country and has publicly said it plans to expand its Russian network to 1,000 shops by 2015. 

Other US fast-food chains—including pizza restaurants Papa John’s and Domino’s Pizza, and burger joints Wendy’s and Carl’s Jr.—have expanded their presence in Russia in recent years as well.

Russia’s robust consumer market is part of the reason these companies are expanding in the country, Verona said.

"The consumer market has been growing faster than the economy as a whole,” Verona told RIA Novosti.

Burger King, which operates around 70 restaurants in Russia, announced plans last summer to open several hundred new locations in Russia over the next several years with the help of local franchise partners and financing from the Russian state-owned investment bank VTB Capital.

Burger King executives admit that they were late to the game in Russia, having launched there in January 2010.

But while it respects the achievements of competitors like McDonald’s and Subway in Russia, Burger King is confident it can become "a significant player” on the Russian market, Ivan Shestov, a spokesman for the company’s operations in Russia, told RIA Novosti.

"We prepare our meat on flame grilling, we have really fresh and quality ingredients and we are happy to satisfy specific consumer needs by customizing recipes of our burgers,” Shestov said.

Local taste buds, for example, are generally not receptive to spicy dishes, he said.

"We try to adapt the menu to Russia, offering a new and exciting menu items, for example pancakes,” Shestov said.

Many US chains have infused Russian culture and customs into their menus to attract consumers across different generations, Joseph Cappa, an expert on the global fast-food industry at Colorado Technical University, told RIA Novosti.

"Local flavor is another aspect of the appeal,” he said.