Exclusive: McDonald’s Russia heir yearns for success but Big Mac is a big loss

  • McDonald’s restaurants reopen under the name Vkusno & tochka in Russia
  • New brand sold nearly 120,000 burgers on opening day, CEO says
  • Suppliers are 99% from Russia, but they need to import components
  • CEO says not having a Big Mac is a ‘big loss’
  • This content was produced in Russia where coverage of Russian military operations in Ukraine is restricted by law

MOSCOW (Reuters) – Big Mac and McFluries may be off the menu at the restaurants left by McDonald’s in Russia, but the new company has ambitious growth goals after it sold nearly 120,000 burgers, a record, on its opening day, as its chief executive. to Reuters.

McDonald’s Corp. (MCD.N) left Russia entirely, selling all of its restaurants to a local licensee in May. Under the new name Vkusno & tochka, or “yummy and that’s it,” 50 restaurants reopened in and around Moscow on June 12 and June 13.

CEO Oleg Paroev is keen to add locations, but acknowledged the challenge of replacing some components and suppliers, as well as dealing with other franchisees still using McDonald’s brands.

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The saga of McDonald’s exit shows how difficult it is for Western consumer companies that decided to leave due to Moscow’s actions in Ukraine to sever all ties with Russia, as well as for domestic operators to replace famous brands.

Thousands who attended the main opening of Vkusno & tochka on Pushkin Square in Moscow were greeted with a new logo, color scheme and segmented packaging for all McDonald’s brands, as the new company lost the right to the trademarks and intellectual property of the American group.

“On the first day we sold nearly 120,000 burgers,” Baroev said. “We’ve never seen such daily sales in the whole time McDonald’s has been operating in Russia.”

While Baruev does not expect this demand to last, he aims to exceed the growth target of new owner Alexander Goffor and achieve it ahead of schedule. Govor’s goal is to reach 1,000 stores in four to five years, up from about 850 under the McDonald’s brand.

Employment continues, Baroev said, which also wants to expand cooperation with strategic partner Sberbank (SBER.MM), although the role of the shareholder in Russia’s largest lender is excluded.

MacDonald’s return?

Gofour, who previously ran 25 restaurants, said at the launch that he paid a “token” amount to McDonald’s Russia and that the US company made it clear it would not exercise the buyback option for 15 years.

Expressing his personal opinion, Baroev said that McDonald’s could return to Russia if Vkusno & tochka again became a franchisee, but stressed that there were no discussions in this sense.

In an emailed statement, McDonald’s said it had “finished the sale of its Russia business and is exiting the market.”

franchise space

Some of the former McDonald’s franchisees kept their brand on their e-packages and menus and sold their Big Mac under a different name, which caused a headache for Vkusno & tochka. Read more

“Of course we are not happy with that,” Baroev said.

He said that while continued use of the McDonald’s trademark is a violation of Russian law, the company cannot take legal action because it has no rights to the trademark.

Rosinter Restaurants (ROST.MM), a former franchisor that still operates at the train stations and Pulkovo Airport in St Petersburg, did not respond to a request for comment.

Baroev said that Vkusno & tochka had proposed to previous franchisees to join the new brand, and one of them had already agreed.

Baruev said Govor has bought about 700 restaurants, leaving about 100 restaurants missing, and while Vkusno & tochka still has access to old suppliers, other former franchisees don’t.

“It’s a mystery to me what products are sold there,” he said of restaurants at train stations and airports, speaking on Friday. “But I can say for sure that it’s not at all the same products or ingredients that were previously sold at McDonald’s.”

Supplier headache

Baruev said Vkusno & tochka is intent on maintaining product quality, but retaining a familiar taste is a challenge.

Although 99% of the products come from Russian suppliers, Baroev said a “significant proportion” of the ingredients come from abroad, a process complicated by sanctions and supply chain disruptions.

Baruev said Vkusno & tochka is looking for a new beverage supplier, as Coca Cola (KO.N) is depleting its stock in Russia. The coffee blend will remain, he said, now offered by an Indian investor who bought the Russian operations of Finnish Poleg.

As agreed with McDonald’s, recipes will change and work is underway to replace the Big Mac, Baroev said.

“This is a huge loss,” he said. “The fact that he has now disappeared from the list does not help us.”

The creation of the new brand will take some time, but Baruev was optimistic.

“Our guests will get used to the new name and understand that they are no longer in ‘Mac’, but in ‘tochka’.”

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Reporting by Reuters. Editing by Matt Soffham and Thomas Janowski

Our Standards: Thomson Reuters Trust Principles.

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