Burger King Commits to Russia as Economy Contracts

Burger King’s Jose Cil reaffirmed the U.S. restaurant chain’s commitment to Russia, where it added more stores than its biggest international competitor last year, even as the economy slides into recession amid sanctions.

“Russia is still very attractive for the company,” said Cil, the president of Burger King Worldwide, according to a company statement during his visit to the city of Kazan in the Volga region. “It has a great growth potential, especially across regions.”

The focus this year will shift to quality, rather than the number of outlets, according to Cil.

Restaurants are battling for customers and profit with Russia’s economy forecast to shrink 3 percent this year, the first contraction since 2009, and disposable incomes estimated to decline 6.3 percent. Consumer spending has been slowing since 2011 even before the U.S. and European Union passed punitive measures against President Vladimir Putin’s incursion into Ukraine last year.

Burger King, part of Restaurant Brands International Inc., is seeking growth in new markets such as South Africa, Russia and France, as well as developing economies China and Brazil, according to a statement from the company last month.

The company has been chasing McDonald’s Corp., which opened its first restaurant in Russia before the collapse of the Soviet Union, a quarter of a century ago. Burger King added 104 restaurants in the country last year, a 61 percent increase to a total of 274, according to its press office. That is more than other fast-food chains, according to the statement. McDonald’s reached 486 restaurants by the end of 2014.

Quality, Quantity

“The company has resources for extensive development in 2015 but we put a stake on plans to focus on quality rather than quantity,” Cil said. The statement didn’t include specific opening plans for this year.

Burger King has been developing in Russia since 2010 through a joint venture with VTB Group and entrepreneur Alexander Kolobov, who runs the Shokoladnitsa coffee-shop chain.

Putin’s ban on imports of some foods, in retaliation against U.S. and European sanctions over the Ukraine conflict, hasn’t had a large effect on the company, according to Dmitry Medovy, the head of Burger King Russia. The unit sources 90 percent of its meat and vegetables locally, helping protect it, while inflation soared to 16.7 percent in February, the fastest pace since 2002.

The company also lowered prices to address weakening consumption in recent months, according to Medovy.

“Like everyone else in the industry, we’ve seen a drop in demand,” Medovy said in an e-mailed response to questions.

(Corrects Cil’s title in second paragraph in article published March 23 after company corrects statement.)
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