Thirty years ago, McDonald’s opened its first Russian location in Moscow’s Pushkin Square. Tens of thousands of Soviet citizens queued for several kilometres to taste the new food from the West.
That first store remains the most-visited McDonald’s location in the world, and Moscow residents still remember that day and how it signalled the beginning of a new era. More foreign chains were soon to open in the Soviet Union and, later, in the independent countries that emerged from its collapse.
These restaurants brought with them innovations that McDonald’s had pioneered such as assembly-line preparation, quick service and affordable prices. But according to Marc Carena, Managing Director of McDonald’s Russia, the image that Russians remember most vividly is the sight of smiles on the faces of McDonald’s staff.
Smiles were rarely seen in public at the time, and they pierced the gloomy atmosphere. Marc says these smiles represent the company’s greatest innovation – the concept of hospitality and the idea that even guests at a fast-food restaurant are entitled to it.
Since joining McDonald’s Russia in 2018, Marc together with his team has sought to build on this legacy of hospitality. Store staff are trained specifically in how to provide hospitality and make guests feel cared for.
“Our stores are known for being affordable, convenient and fast, but with all of the benefits of a full-service restaurant – table service, freshly prepared food on order and guest experience leaders,” he says.
A fleet of small ships
Marc’s combination of the qualities of quick-service restaurants and full-service restaurants within the same store as well as changing the commercial strategy towards being more affordable, represented a break from the previous management and a response to Russia’s financial crisis, which began in 2014.
At that time, the rouble lost 58% of its value, and Russians’ disposable income has declined by 2 to 4% every year since.
Our stores are known for being affordable, convenient and fast, but with all of the benefits of a full-service restaurant – table service, freshly prepared food on order and guest experience leaders.
“What we observed since 2014 is that consumer behaviour altered substantially. Consumers were looking for value for money and they moved away from branded goods to private labels. We saw a similar trend in our industry but we did not really listen well to our consumers and neither did we adjust to the changing environment. Most of our decisions like pricing were made nationally, without really taking any regional and local needs into account,” Marc recalls.
“So we saw many consumers shift from fullservice restaurants to quick-service restaurants, but they didn’t switch to us, and we were losing market share. My first thought when I came on board was that we needed to somehow find a way to reverse this trend and beat the competition, being more flexible and nimble and making sure that the decision-making power is delegated to where the customer value is created, which is at the store level.”
To explain the strategy, Marc conjures the analogy of a super tanker and a fleet of small ships. “I used the example of McDonald’s being a very strong but slow-moving super tanker, which takes a lot of time to shift gears or change directions, versus a fleet of smaller, nimble ships – our individual stores – which really have the opportunity to locally beat their competitors while still following an overarching strategy,” he says.
That strategy involves increasing entrepreneurship and service quality at the store level to fade away the boundaries between full service and quick service, and combining the best of both worlds. Marc realised that one of the inhibitors of improving the service times was the strong proliferation of menu items.
• McDonald’s Russia operates 760 stores in more than 150 cities, serving 1.8 million customers a day, or around 650 million a year, which means that every Russian comes into McDonald’s four times a year on average.
• The company has 60,000 employees, and is the largest youth employer in Russia. Its suppliers employ another 160,000 employees.
• In Russia, every fifth out-of-home meal, every third coffee and every third ice cream are consumed in a McDonald’s.
• The company has invested about €2.1 billion into the Russian market.
• In 2019, Marc received the Ethics Champion Leadership Award from the McDonald’s Group. The award is given based on anonymous nominations to the person who has gone above and beyond their role to support McDonald’s ethical culture.
• In 2018, Marc was included among the top 100 Business Leaders in Russia by magazine Business Petersburg.
• In 2018, 2019 and 2020, McDonald’s Russia was listed by top20brands.ru as one of the 20 most-loved brands by Russians.
The first step was therefore reducing menu complexity. By eliminating all but the bestselling items, they were able to cut waiting times down from three minutes to two. The second step was to launch the first value meal in Russia, making products more affordable.
The third step was to accelerate the roll-out of restaurant modernisation, dubbed internally “experience of the future”, with the biggest consumer impact coming from table service, and adjusting the kitchen processes to produce every sandwich fresh on order.
“Today, you will not find any McDonald’s restaurant in Russia that does not prepare everything on order. There’s no pre-prepared sandwich waiting in a warm holding area for you. We call this the ‘Made for You’ kitchen set-up,” Marc says.
Moreover, in parallel to table service, each guest is taken care of by a guest experience leader, who is encouraged to act entrepreneurially – their ability to connect with guests and make them feel comfortable and cared for is what keeps people coming back.
Stores are equipped with machine-learning tools that work in the background to forecast demand to help staff prepare for high and low demand fluctuations of each day and week. And with the installation of self-order kiosks, guests now have yet another option in how they want to be served.
“We created such a unique combination of the benefits of the quick-service and full-service restaurant in one, that nobody is able to follow us in the market, because the precondition to be able to do so is a very high volume of customer transactions,” Marc says.
“You can’t afford to offer table service and a guest experience leader while at the same time having low volumes and low prices, as the fixed costs would just be prohibitive. This is something we really perceive as an ongoing competitive advantage.”
Most beloved retaurant
When Marc joined McDonald’s Russia, he already had a wealth of relevant experience under his belt. He had spent six and a half years at the German multinational wholesaler METRO Cash & Carry, first overseeing advertising for the Romanian market and South Eastern Europe and then taking over as CEO for Croatia.
Earlier in his career, he spent nine years at Nestlé, holding managerial positions in his native Switzerland as well as India and North-West Africa and finally running the food service division of South Europe.
However, despite these skills and experiences, Marc felt some apprehension at the start of his new Russian adventure. He was the first non-Russian after 22 years to lead McDonald’s Russia and, although he spoke six languages, Russian was not one of them.
The best thing we can do is to show how we support the local community and that our presence and investments into Russia are a win–win for all sides.
He wondered how he would communicate with employees who did not speak English. “My major worry was whether I would be accepted by the local team, being the only expat among the 50,000 employees there at the time, not speaking Russian and being the first non-Russian Managing Director after 22 years,” he says.
“I was also aware that there were a lot of political tensions between the US and Russia, which made us a bullseye as one of the largest US companies in Russia. The culmination of these tensions led to the forced closure of several of our restaurants in 2014.”
However, as soon as he got to work on executing his strategy for the company, the results began to speak for themselves. The first step was to align the team to the new strategy, focused on consumer insights and changing the mindset to become more entrepreneurial, challenging the status quo.
Through the introduction of a continuous improvement process integrated into the store operating procedures based on the kaizen approach, Marc tried not only to change the management top down but also bottom up.
In addition to reconfiguring the kitchens and dining experience within his 760 stores, he changed the menu and the pricing policy to become more affordable (including the launch of the combo menu), followed by the launch of a mobile app that links users through their social media profiles to the McDonald’s loyalty program.
The app keeps users informed of updates and promotions, increasing what Marc calls the “stickiness” between McDonald’s and its customers. Marc and his team have also expanded McDelivery and McDonald’s restaurant footprint with a particular focus on its Drive-Thru service, and the company is now the clear leader in both channels.
It is also the first restaurant chain in Russia to introduce a waste disposal and recycling program. These adjustments have resulted in McDonald’s Russia being declared one of the top 20 most loved brands and the most loved restaurant in Russia for three years in a row.
In 2019, the company also achieved its best financial results of the past decade, cementing McDonald’s Russia as one of the fastestgrowing markets in the McDonald’s system. “In the end, my worries were not justified at all because I was extremely well-received by my team, and felt welcome,” Marc recalls.
“My team is made up of extremely smart, hardworking and committed people, and it has been a pleasure and honour for me to work together with such talented people.”
Under Marc’s leadership, McDonald’s Russia has experienced steady, consistent growth, but he does not take it for granted. In fact, he believes the Russian market is still vastly under-penetrated compared to other markets and compared to its own potential.
This might sound inaccurate for a market with hundreds of stores, including the most-visited one in the world. However, two metrics confirm Marc’s assessment. First, Russian consumers spend an average of €10 per month on out-of-home food, whereas consumers in Europe spend about 35% of their disposable incomes, and in the US, up to 50%.
The second metric indicates that McDonald’s Russia actually comprises relatively few stores per inhabitants. Compared to another country with similar purchasing power, Poland has one store per every 85,000 inhabitants, whereas Russia has one store for every 220,000.
“These numbers should give you a good feeling of why we believe there’s still a big opportunity for further expansion,” Marc says. McDonald’s Russia started 2020 with 732 stores and Marc and his team hope to open over 60 by early 2021 If they hit that mark, Russia would become McDonald’s second-fastest expanding market in the world, behind China.
This expansion requires a supply chain that is as efficient as possible, especially considering the huge distances in Russia. Marc and his team focused on reducing the input costs and managed to offset food inflation two years in a row and to further increase the degree of localisation from 97 to today’s 99%, with the aim of raising this number to 100% in 2021.
“When we entered the market 30 years ago, we struggled to find reliable suppliers that were able to follow our quality standards. Today, we have developed over 160 suppliers, achieving the highest global food safety and quality standards, and 142 of them are now even exporting outside of Russia,” he says.
Marc hopes that the work with these partners and suppliers, which employ about 160,000 people in Russia, will signal to the Russian authorities that although McDonald’s has an American origin, it is one of the most Russified foreign companies in the country. He points out that McDonald’s Russia is the largest taxpayer in the food service industry.
“Over the last two years, we’ve been more proactive in showing the authorities how Russified we are and how much we really do contribute to the economy,” he says.
“We produce everything locally and, apart from me, everyone else in the company is Russian. We are very much local and we support local businesses and communities.” At the start of the COVID-19 pandemic, Marc received a sign that the government relations efforts had succeeded.
For the first time, McDonald’s Russia was declared as a system-relevant company for the economy by the Russian government, giving the company a seat at the table in determining how the local food industry should respond to the crisis.
Throughout the pandemic, McDonald’s Russia has been aiding the local response to the pandemic by providing over 500,000 free meals to frontline healthcare workers. “When you’re one of the largest American companies in the country, you can’t really hide,” Marc says.
“The best thing we can do is to show how we support the local community and that our presence and investments into Russia are a win–win for all sides, and I think we have made good progress in that direction.”
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