Russia’s “oil-fired economic miracle is unraveling,” the protests over the car tax is being hailed as a sign of “broad discontent,” unemployment grows by 400,000 in November with an extra 70,000 this past week alone, Russia’s richest man, Oleg Deripaska, is looking for investors wherever he can to save his metal empire, and Putin is imploring Russia’s business to only fire people only if it is absolutely necessary. From reading today’s English language press, one would think it was February 1917 all over again.
Luckily for all of Russia’s unemployed and redundant labor, there is one business that might be hanging “Help Wanted” signs as the rest of the economy goes down the toilet: McDonald’s.
In an interview in Vedomosti, Khamzat Khasbulatov, Micky D’s man in Russia and Eastern Europe, had this to say about how the economy has affected his company’s ability to peddle cheap, overly processed burgers.
Have McDonald’s felt the crisis in Russia?
Many companies are up in arms about operating funds. Do you have a problem with liquidity?
No, but it’s known that there is no money. The truth of this claim is now strongly felt by those whose businesses are built on borrowed capital. When businesses are created on the basis of rapid growth and sustained credit, the problems can be very serious. Today even experts can’t predict the depth of the global crisis, its duration, or its consequences. History has shown only local and continental crises: the depression in the USA in the 1930s, the Latin American crisis of the 1980-90s, the crisis in Asia in the mid-1990s, the Russian crisis of 1998. At the moment, we don’t feel the influence of this crisis.
Forget about Khasbulatov’s selective history and geographical mapping of past crises of capital, the big question is why is McDonald’s so economically resiliant. One clue might be in Khasbulatov’s recollection of McDonald’s performance during the 1998 crisis.
How did the 1998 crisis effect McDonald’s?
We had to lower our costs but there was an increase in the number of visitors for the most part because we increased the assortment of products at a low price. Taking into account that our customers are people with a low income, we must be more balanced in how we determine prices. We’ve always maintained the rule that the growth of our prices must be below the rate of inflation. We have the resources for this. Almost 80% of our products in our restaurants are produced in Russia, and we are less subject to the course of fluctuations than many players in the market. In general, our position in 1998 was so stable that we did not attempt to lay these expenses on the consumer.
And what are McDonald’s profits in Russia? “This is secret information,” says Khasbulatov.
One thing is that Ronald McDonald’s house looks like to be the one of the few bright buoys in a sea of darkness in 2009. The burger joint plans on opening new and bigger restaurants, remodel existing ones, expand their McKaffe stores, and expand the menu. Given that 75% of their employees are young people, I would image as unemployment increases, McDonalds are going to get a new rash of applications in the near future. As of 2005, the average McD’s employee earned about $250 a month. This has increased to about $400. Now that’s a bright future!