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

  • McDonald’s restaurants have reopened as Vkusno & tochka in Russia
  • New brand sold nearly 120,000 burgers on opening day, CEO says
  • Suppliers based 99% in Russia, but who must import ingredients
  • No Big Mac is a ‘big loss’, says CEO
  • This content was produced in Russia where the law limits coverage of Russian military operations in Ukraine

MOSCOW, June 21 (Reuters) – Big Macs and McFlurries may not be on the menu of McDonald’s successor restaurants in Russia, but the new company has ambitious growth targets after selling nearly 120,000 burgers , a record, the day it opened, according to its general manager. told Reuters.

McDonald’s Corp exited Russia altogether, selling all the restaurants it owned to a local licensee in May. Under the new name of Vkusno & tochka, or “Tasty and that’s it”, 50 restaurants in and around Moscow reopened on June 12 and 13.

General manager Oleg Paroev wants to add locations, but acknowledged the challenge of replacing some ingredients and suppliers, as well as dealing with other franchisees still using the McDonald’s brand.

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The McDonald’s exit saga shows both how difficult it is for Western consumer companies that have decided to exit Moscow’s Ukraine shares to sever all ties with Russia and for local operators to replace popular brands.

Thousands of people who came to Vkusno & tochka’s flagship opening in Moscow’s Pushkin Square were greeted with a new logo, color scheme and packaging devoid of any McDonald’s branding as the new company lost the right on trademarks and intellectual property of the American group.

“On the first day, we sold almost 120,000 burgers,” Paroev said. “We have never seen such daily turnover since McDonald’s worked in Russia.”

While Paroev doesn’t expect such demand to last, he aims to beat new owner Alexander Govor’s growth target and get there sooner than expected. Govor’s goal is to reach 1,000 stores within four to five years, up from around 850 under the McDonald’s brand.

Hiring is continuing, said Paroev, who also wants to expand cooperation with strategic partner Sberbank (SBER.MM), although he has ruled out a shareholder role for the top Russian lender.

THE RETURN OF MCDONALD?

Govor, who previously ran 25 restaurants, said at the launch he had paid a “token” sum for McDonald’s Russia and the US company had made it clear it would not exercise a 15-year buyout option.

Paroev, expressing his personal opinion, said that McDonald’s could return to Russia if Vkusno & tochka became a franchise again, but stressed that there had been no discussions to this effect.

In an emailed statement, McDonald’s said it had “completed the sale of its Russian business and exited the market.”

THE ENIGMA OF FRANCHISING

Some former McDonald’s franchisees have retained their branding on electronic packaging and menus and are selling Big Macs under a different name, creating a headache for Vkusno & tochka. Read more

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

Although continued use of the McDonald’s brand is a violation of Russian law, the company cannot sue because it has no rights to the brand, he said.

Rosinter Restaurants (ROST.MM), a former franchisee still operating at train stations and Pulkovo airport in St. Petersburg, did not respond to a request for comment.

Vkusno & tochka offered former franchisees to join the new brand, Paroev said, with one of them having already agreed.

Govor bought around 700 restaurants, Paroev said, leaving around 100 missing and although Vkusno & tochka still has access to former suppliers, other ex-franchisees do not.

“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 with certainty that these are absolutely not the same products or ingredients that were sold before at McDonald’s.”

SUPPLIER HEADACHES

Vkusno & tochka is committed to maintaining product quality, Paroev said, but maintaining a familiar taste is a challenge.

Even though 99% of products come from Russian suppliers, Paroev said “a significant percentage” of ingredients come from abroad, a process complicated by sanctions and supply chain disruptions.

Vkusno & tochka is looking for a new beverage supplier as Coca Cola (KO.N) runs out of stock in Russia, Paroev said. The coffee blend will, he said, continue to be supplied now by an Indian investor who bought the Finnish Paulig’s Russian operations.

As agreed with McDonald’s, recipes will change and a Big Mac replacement is in the works, Paroev said.

“It’s a big loss,” he said. “The fact that it has now disappeared from the menu does not help us.”

Establishing the new brand will take time, but Paroev was optimistic.

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

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Reuters reporting; Editing by Matt Scuffham and Tomasz Janowski

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