McDonald’s became a leading ambassador of American culture after opening its first restaurant in Moscow in the twilight of the Soviet Union, writes The Wall Street Journal (Nov. 8, 2018). Now, as Russia-U.S. tensions rise and pro-Kremlin politicians call to close the U.S. chain, management is taking a new tack: Go Russian. This year, the company boosted the share of Russian suppliers its restaurants use to 98%. McDonald’s has succeeded world-wide in part by finding local suppliers wherever its restaurants operate, shortening supply chains.
The local focus appears to be paying off. The number of McDonald’s restaurants in Russia grew 6% this year. The firm sees Russia as a high-growth market able to offset the saturated U.S. market. The company opened its first restaurant on Pushkin Square in 1990, where it served 30,000 hungry Soviet Muscovites on its first day.
U.S.-Russian ties have frayed in recent years. The first shots against McDonald’s were fired in 2014 after the U.S. sanctioned Russia following Moscow’s annexation of Crimea. Russian authorities at the time closed 12 restaurants nationwide, including the Moscow flagship, and subjected hundreds of others to snap health inspections. The temporary closures had little effect on sales, but management used them as an opportunity to refurbish restaurant interiors and start digitizing processes.
After that experience, McDonald’s focused on boosting purchases from local producers for almost everything it served. Critically, McDonald’s signed a contract to buy its french fries from a Russian producer—a first in its almost 30-year history. The agreement ends one of McDonald’s most fraught endeavors here: finding the right supplier to reliably deliver fries up to the company’s standards. And McDonald’s advertising strategy is focused on getting the word out. Delivery trucks are painted with a large “98%,” signifying the company’s share of local suppliers.
Classroom discussion questions:
- What makes the Russian supply chain so difficult for the firm?
- Why are the French fries an issue?