US sanctions spur McDonald’s to cook up Russian fries
LIPETSK, Russia (Reuters) – French fries at McDonald’s restaurants from Moscow to Murmansk will be Russian from now on, as US sanctions have spurred on a shift by the American fast-food chain to use local potatoes.
McDonald’s Corp., which opened in Russia in 1990 as the Soviet Union collapsed, has turned to Russian ingredients for everything from Big Macs to chicken burgers.
But until now it relied on frozen French fries from the Netherlands and Poland because Russian spuds were not quite right.
“There was no potato that would suit us in terms of quality – color, taste, size,” McDonald’s Russia chairman Khamzat Khasbulatov told Reuters. “These are all the details that are important for us.”
But swings in the price of oil and sanctions by the United States and other Western nations – imposed over Moscow’s annexation of Crimea and other rows – have hit the ruble and led to trade restrictions, causing a headache for any business in Russia that imports or exports goods.
“The ruble’s volatility was one of the major components of our interest in localization,” Khasbulatov said.
Now a new plant near Lipetsk, a city 450 kilometers south of Moscow, using potatoes grown on local farms will supply frozen fries to the chain of 651 outlets across Russia under a long-term contract, raising the share of the chain’s locally sourced products to 98%.
“This gives us the possibility to continue our development in a more stable way,” Khasbulatov said. “It minimizes the risks connected to customs and administrative decisions and guarantees stable, predictable prices in rubles.”
The plant, worth 8.7 billion rubles, was built jointly by Russian agricultural group Belaya Dacha and Netherlands-based Lamb Weston Meijer, both long-time partners of McDonald’s.
The factory has capacity to process 200,000 tons of potatoes a year, washing, cutting and freezing the vegetables.
The ruble has recovered some ground as the price of oil, a major revenue earner for Russia, has risen from a low in 2016. But Western trade restrictions remain in place.
Russia’s response to punitive measures has included a 2014 ban on a range of Western food imports.
“Sanctions as well as counter-sanctions not only affect our company but the whole industry and the economy,” Khasbulatov said. “But in any case, we continue our development, continue to build new restaurants and modernize existing ones.”
McDonald’s opened 41 restaurants in Russia in 2017 and has 50,000 Russian employees and more than 160 domestic suppliers, he said.