Gastro-Geschäft aktuell / Zahlen Top 40 Player

Rauchverbot, Food-Embargo sowie McD-Schließungen: 2014 – eine extrem herausfordernde Situation für die russische Restaurant-Branche. 2013 – ein ausgesprochenes Boom-Jahr. Die Top 40 Foodservice-Player erweiterten ihr Netzwerk von Mitte 2013 auf Mitte 2014 um 14 % auf 7.000 Units – davon knapp 2.900 in Moskau. Burger King heißt einer der ganz großen Gewinner. Julia Matveeva, die Herausgeberin der russischen Food Service-Zeitschrift, berichtet aktuell in englischer Sprache. Sämtliche Zahlenrecherchen durch sie und ihr Team.

Der Beitrag erscheint in der nächsten Ausgabe von FoodService Europe & Middle East mit sehr viel weiterem Zahlenmaterial - unter anderem auch für die Städte Moskau und
St. Petersburg.

Russia: Navigating in Stormy Waters.

The current year proved quite eventful for the Russian foodservice market. A law that prohibits smoking in restaurants, bars, and hotels came into effect on June 1. However, a true challenge for the industry came two months later, when, in response to the economic sanctions imposed over the Ukraine crisis, Russia announced a one-year ban on certain agricultural produce, foods and raw materials from the EU, Norway, Canada, Australia, and the US.

The food embargo broke the supply chains established over the years: traditionally, large restaurant companies got over 70% of all purchased food from abroad. Dairy products, cheese, fruit and vegetables, fish, seafood, bakery and confectionery ingredients, as well as a number of ready-to-cook and cooked products for the HoReCa industry came from the European countries: Poland, Norway, Italy, Spain, France, the Netherlands, Lithuania, etc. The embargo shook up the restaurant market, forcing the suppliers and the restaurateurs to promptly look for ways to replace banned foods with products from Latin America, the Middle East and the CIS states.

With a number of items, they somehow succeeded: thus, salmon is now imported from Chile and the Faroe Islands, beef from Latin America, some varieties of herbs and lettuce from Turkey and Israel. Cheese, especially hard cheese and blue cheese, and meat delicatessen such as prosciutto or bresaola proved the most difficult to replace. The embargo also caused a stronger interest in the products made in Russia – that, plus the fact that renowned Russian chefs have been promoting local farm produce for some time. However, many restaurateurs note that Russian manufacturers are not ready to work with large restaurant companies due to insufficient volumes, instable quality, and the lack of well-established supply chains, which are yet to be built.

The situation is further complicated by the fact that within the first month after the embargo was announced, food prices grew by 15-20% on average, and the price of certain foods, like salmon or Romaine lettuce, doubled. This has a devastating effect on the catering economics, forcing chefs to rework the menu over and over in order to keep the growing food costs under control. Meanwhile, restaurateurs don't have much room for a significant price increase: the slowing economic growth and the unstable political environment in the first half of 2014 had a negative effect on consumption in the restaurant segment.

From the financial statement of Rosinter Restaurants, Russia's only public restaurant company, we can see that the consolidated total net operating revenue in the first half of 2014 dropped by 8.9% compared to the same period in 2013, and the gross revenue of all comparable restaurants decreased by 7.6%.

McDonald’s under fire from the authorities

Mass inspections of McDonald's restaurants were another feature of recent months: Rospotrebnadzor, the state consumer watchdog, has claims against the quality and safety of certain foods sold in the restaurants. As of the beginning of September, about 180 inspections were carried out throughout Russia (the total number of McDonald's restaurants in Russia is 433). As a result, operations were temporarily suspended in three restaurants in Moscow, two in Yekaterinburg, and isolated restaurants in a few Russian regions. It will be recalled that McDonald's is one of the few international companies that chose to expand into the Russian market without franchising.

The opening of the first McDonald's in Pushkinskaya square in 1990 marked the beginning of a new era for the Russian foodservice industry. Many managers who are now heading other restaurant chains began their careers at McDonald's. Until recently, the American company increased its presence in Russia by 15% annually: thus, it opened 55 new restaurants from mid-2013 to mid-2014. In the spring of 2014, the construction of a so-called ‘City of McDonald's Suppliers’ began in Alabuga, a special economic zone in the Volga region, aimed to facilitate the expansion of the American chain into the eastern regions of the country: a Havi Logistics distribution center and a Huhtamaki Foodservice disposable tableware facility.

It has to be mentioned that until recently, the Russian foodservice business offered attractive investment opportunities, as is shown by the impressive growth rates in the networks of the market leaders. Within the last twelve months, Russia's 40 largest restaurant companies increased their presence in the market by 14.3% (over the previous year, they grew by 15%). However, eleven out of 40 companies recorded negative growth; the share of companies with a decrease in assets is the highest in the history of our ranking.

Operators turn to the provinces

Recently, the large chain operators have shifted their development focus from Moscow and St. Petersburg to the Russian regions. Thus, Moscow's 20 largest restaurant brands grew by no more than 4.1% within the last year (2013: 12.8%), and Petersburg's 20 largest chains grew by 8.5% (2013: 19%). While the Moscow and St. Petersburg restaurant markets are quite saturated, the regions hold great potential for opening new outlets.

Local entrepreneurs often opt for a franchise of a popular brand. This is the development model adopted by three of this year's growth champions – Killfish Discount bar, Harat's, a budget-friendly pub chain, and Carl's Jr, an American burger brand. In fact, for several years franchising has been the main expansion strategy for most restaurant chains in Russia.

Burger King remains the absolute growth leader for the second year in a row. Within the last twelve months the American chain, supported in Russia by a strong financial partner, VTB Capital, opened 115 new restaurants throughout the country.

Burger King’s expansion is likely to become even more aggressive next year: it was announced this summer that the Shokoladnitsa coffee shop chain, whose owner Alexander Kolobov holds a franchise for Burger King in Russia together with VTB Capital, is close to buying out its main competitor, the Coffee House chain. In mid-2014 Shokoladnitsa had 434 coffee bars in Russia, while Coffee House had 191. It is expected that Burger King restaurants and Vabi Sabi sushi bars – another concept owned by Alexander Kolobov – will be opened in the Coffee House locations.

Take-out sushi bars on the rise

Talking about the Japanese segment, we should mention an interesting trend: over the past year, a number of small take-out sushi outlets with minimal seating have emerged. This format marks the logical end to the evolution of Japanese cuisine: present in the Russian market for 15 years, it went from a high-end delicacy to popular fast food, along with burgers and sandwiches. While traditional sushi bars expand their menus with dishes from other cuisines, the Japanese segment continues to grow through stores selling ready-to-eat food.

One of the niche leaders, the Petersburg-based Sushi Shop chain, currently has 205 outlets throughout Russia (45 of them in Moscow, 62 in St. Petersburg). Within the last year, the company's turnover increased by 30%. The chain attracts guests with its low prices: a set of four maki sushi can cost 400 rubles/€8. The menu has been adjusted for Russian tastes: fried and smoked chicken, bacon, green onions, dill and walnuts are listed among the ingredients.

Considering the food import restrictions, adding Russian or Soviet-style dishes to the menu seems a logical solution for any restaurant concept. Chefs joke that they'll have to learn how to cook 150 different dishes from herring and potatoes in the not-too-distant future, hoping deep down that the embargo won't last long. However, it can be expected that the investment activity in the restaurant segment in the coming months will decrease, and the operators will focus their efforts on business process optimization. Talking about new concepts, it would make economic sense to open restaurants based on Russian cuisine or regional Russian specialties, as well as the cuisines of the former USSR countries, for example, Uzbek or Georgian, which are the least dependent on imports.