Russia - The Fast food market

 

Claiming that Russia is “an exciting, active market with a vibrant economy,” Burger King’s executive management is quite optimistic about the company’s prospects. “We believe that our brand’s entry into Russia exemplifies our company’s commitment to diversifying our global restaurant portfolio and represents a milestone in our expansion strategy in the region,” said John Chidsey, the chairman and CEO of the Burger King Corporation. “More than 80 percent of our net restaurant growth is realized in international markets, and we are pleased with our new strategic market entry into Russia and its future expansion potential.”

 

In order to launch operations in Russia, Burger King has established a daughter company called Burger Rus, managed by Alexander Kolobov who has successfully established a well-known chain of coffee shops called Shokoladnitsa. Burger King’s first restaurant is located in the newly-built Metropolis shopping mall in the northwest of Moscow, and there’s another one in the western part of town at the Evropeiskyi shopping center. “The third restaurant will soon be opened in the Mega Teplyi Stan shopping mall,” said Alexandra Blokhina, a spokesperson at the Grayling PR agency which presents Burger King’s. “More restaurants will open in Moscow and other cities when the company has planned their locations and built the right infrastructure within the framework of expanding its business in Russia.” Blokhina added that Burger King will work with local suppliers when it comes to packaging, salads and sauces, and the beef for the burgers will also be produced locally. In the future, the company will expand its cooperation
with the local suppliers for economic reasons.   

 

Analysts believe the company has chosen the right time to enter the Russian market for several reasons. “Considering the recent decline in fast food sales in the United States and the EU countries, it makes sense to focus the attention on new, developing markets, such as Russia, Brazil and South Korea,” said Michael Schaefer, an analyst at Euromonitor International. “Burger King's strategy gives it the chance to establish itself as a global operator, but the company will have to follow through on every key point, such as compelling menu items, attractive outlet design, etc.”

 

Lower rent prices on commercial real estate during the economic crisis contribute to making the Russian market very attractive. Moreover, the popularity of fast food in Russia has grown dramatically ever since the crisis first hit the country. And Burger King certainly wasn’t the only one to notice. “The financial crisis has had a positive impact on the fast food market segment,” said Valeria Silina, the PR director at Rostiks Group, the second main player in the Russian fast food market after McDonald’s. “Apart from our regular patrons, we are getting many new customers. These people used to eat at casual-dining or fine-dining restaurants, but they were forced to cut their expenses,” she said. About 70,000 people visit Rostiks restaurants daily, most of them teenagers, young people aged 20 to 29 years old and families with children. The average order nowadays comes to 200 rubles ($6.50), a price that hasn’t changed since 2008.

 

But limited budgets are not the only reason behind the growing popularity of fast food in Russia. “Fast food chains are attractive to clients because they offer good service and a comfortable environment for an affordable price. It is quite difficult to survive in the modern fast-paced world without fast food,” Silina added. Rostiks is planning to open ten new restaurants this year, but the company believes that there are still are many unoccupied niches in Russia’s market. “McDonald’s is Burger King’s main competitor, but not our direct competitor,” Silina said. “Undoubtedly, Burger King will establish a fan base of its own in Russia.”

 

Presently about a dozen large fast food chains operate in Russia. Euromonitor International estimates that more than two thirds of the market is controlled by McDonald’s, Rostiks and Sbarro. The biggest local fast food brands that offer traditional Russian dishes, such as Teremok Russkie Bliny and Kroshka Kartoshka, have a much smaller share of the market. At least half of Russians aged 16 to 50, both male and female, purchase fast food at least once a week, a poll conducted by the School of Russian and Asian Studies found. Most of these clients consider location (64 percent) and cost (54 percent) as the most important factors, while only 43 percent care for quality and 25 percent – for cleanliness.

 

Despite the fact that the average lifestyle in big cities forces people to buy fast food on a regular basis, the quality of these meals is still a controversial topic. “[Fast] food is poison. Its nothing but salt, fat and processed grain! It is terrible for you. You Russians have real organic food, developed agriculture, you have something so precious, why are you going to give that up? You have to be rich in America to afford food like that, and no one rich eats at McDonald’s here,” said Pauline, who called in to RT television channel during its report on McDonalds’s 20th anniversary in Russia. But a blogger who goes by the nickname of nBob disagreed: “There are not enough affordable places in Moscow. This is why there are always big queues at fast food restaurants. So any new outlets with good, fast service are welcome."

 

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