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In a world in which sanctions and tariffs are becoming regular responses to disagreements between countries, multi-nationals like McDonald’s have to toe a fine line. Upsetting business in a foreign market that has become lucrative could have a major impact on results. In Russia, McDonald’s is reassuring citizens that it’s very much a “local” business. Thomas Grove reports in The Wall Street Journal:
MOSCOW— McDonald’s Corp. became a leading ambassador of American culture after opening its first restaurant here in the twilight of the Soviet Union. Now, as Russia-U.S. tensions rise and pro-Kremlin politicians call repeatedly to close the U.S. chain, management is taking a new tack: Go Russian.
Earlier this year, the company boosted the share of Russian suppliers its restaurants use to 98%, and it has embarked on a marketing campaign to drive home the point that in Russia McDonald’s doesn’t have to be an American company.
“People are only now starting to understand: We’re one of the most Russian companies there is,” Moscow-based McDonald’s spokeswoman Elena Chilingaryan said.
McDonald’s has succeeded world-wide in part by finding local suppliers wherever its restaurants operate, shortening supply chains and insulating against foreign-exchange volatility. But as tensions between Washington and Moscow rise, the company is finding that strategy can ease political pressures as well.
“McDonald’s has remained profitable here and weathered the storm in geopolitics by going local,” said Narek Avakyan, chief financial officer at Moscow-based consulting company Alliskit.
The local focus appears to be paying off. The number of McDonald’s restaurants in Russia grew 6% year-over-year last quarter, well above the global average of 1.5%. And while Russian outlets only account for a fraction of McDonald’s world-wide total, the company still sees Russia as a high-growth market able to offset saturated markets like the U.S. A large majority of McDonald’s restaurants in Russia are company-owned.
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