In 1988, when the Berlin Wall was still standing and Russia was still a part of the Soviet Union, McDonald’s opened its first restaurant in Moscow. The first of the chain’s restaurants to open inside a communist country, it drew crowds and global attention. Today, McDonald’s has 35,000 restaurants in more than 100 nations.
In April, the world’s largest fast-food chain took a rare step backward, saying it had closed its three restaurants in Crimea after 17 years in the republic recently annexed by Russia. McDonald’s denied the pullout had anything to do with geopolitics, pointing instead to the lack of banking facilities in the region, although there are growing calls to force the closure of the 400-plus McDonald’s restaurants spread throughout 22 Russian cities.
The company’s first quarter earnings report highlights the allure of gaining global customers and the company’s desire to lower its risk. Profits and revenue fell in U.S. restaurants but edged up globally in the quarter. Most of the company’s growth will come through international markets, executives acknowledged, saying they are working to shore up core markets, not just in the U.S. but also in Germany, Australia and Japan.
The company has more than 2,000 stores in China, where revenue declined 3.6 percent in 2013 after years of steady growth. The sales decline came as Chinese consumers avoided eating poultry, which makes up a major portion of the menu. In response, McDonald’s this year introduced Pork McNuggets to its Chinese market.
After a drop in sales in Japan this year, McDonald’s introduced a shrimp burger in the market.
And, to lower its overall risk throughout the world, McDonald’s officials say they want to increase the number of franchises, and reduce the number of company-owned stores.
Yum! Brands, which owns KFC, Taco Bell and Pizza Hut restaurants worldwide, is the largest fast-food chain in China with more than 3,500 restaurants. After seeing its sales plummet there by 15 percent in 2013, KFC is revamping its menu and introducing a series of advertisements featuring Chinese celebrities.
Pizza Hut has more than 15,000 locations in 88 countries, which now includes Iraq following April’s opening of a full-service 120-seat restaurant in the Kurdistan region of northern Iraq. The menu is in Kurdish and offers a range of appetizers, pizzas and flatbreads, pasta, salads, desserts and drinks.
The McDonald’s and Yum! Brands stories underscore the opportunities and risks that come for agricultural interests and transportation providers. When a chain enters a market, most of its food products are imported from the U.S. As the business matures, local sources are increasingly found, but some items remain American-grown.
French fries in most fast-food outlets globally originate in the U.S. The U.S. Potato Board uses fast-food restaurants as a launching pad to get U.S. potato products established in new markets.
In 2013, U.S. exports of frozen potatoes reached 926,553 metric tons, valued at nearly $1.05 billion, the first time exports topped the billion-dollar mark. Leading the increase was 28 percent growth in shipments to Mexico, a 26 percent increase to South Korea, an 8 percent increase to Malaysia and a 15 percent increase to Vietnam.
“For emerging and developing markets experiencing growth in the quick service restaurant sector, establishing the U.S. fries as the high-quality standard has been essential for growth of the U.S. potato industry,” according to the United States Potato Board. Part of the international marketing strategy is to assist the food service industry by providing training and education programs, the board said.
“We’ve still just scratched the surface of global growth,” Pizza Hut CEO Scott Bergen said.
U.S. poultry exporters say entering a new market requires working with the local industry. “Smallholders, or subsistence farmers, naturally fear a situation where they see containers of product coming in,” said Toby Moore, vice president of the U.S.A. Poultry and Egg Export Council. “What we want them to know is that we are interested in meeting growing demand there, and we are not interested in putting small producers out of business. Small producers aren’t going to be able to supply Yum or McDonald’s. We aren’t going to supply the local wet markets or other traditional markets.”
As chicken consumption grows because of quick-serve restaurants, overall demand will increase, enabling local producers to sell more as well, he said.
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