After one year of operations, Russia’s McDonald’s replacement already more successful than original, owner reveals

After one year of operations, Russia’s McDonald’s replacement already more successful than original, owner reveals
/ bne IntelliNews
By bne IntelliNews June 9, 2023

Vkusno I Tochka, the fast food chain established following the exit of McDonald’s from the Russian market, is already outperforming the American chain after just a year of operations, the company has revealed.

McDonald's made the decision to exit Russia in March 2022 due to significant pressure exerted on the company following President Vladimir Putin's full-scale invasion of Ukraine. By June 2022, all of the company's restaurants had been sold to local licensee Alexander Govor, who renamed the chain "Vkusno I Tochka" (Tasty, period). One year later, Vkusno I Tochka has successfully rebranded over 860 outlets throughout the country and has served more than 400mn burgers and 200mn servings of fries to its customers. The company claims to have approximately 1.8mn people come through its doors daily.

Speaking at a press conference commemorating the anniversary, Govor explained that Vkusno I Tochka had received over 500mn visits in the past year. He further revealed plans not only to reopen and rebrand all former McDonald's restaurants, but also expand into new, remote cities that had previously been out of reach of the iconic American fast food brand.

"At the end of May 2023, our share among the three major fast-food players was 58%,” Govor said. “This exceeds the best performance of our predecessor [McDonald’s] and the combined share of our two main competitors. These results have been achieved thanks to the rapid refurbishment of the menu and key services.”

The best performance of McDonald's in Russia, in terms of both sales and operating income, occurred in 2021. In 2023, Vkusno I Tochka's sales have consistently surpassed the sales of the corresponding months in 2021.

In an interview with the Russian state-run media RIA Novosti, Oleg Paroev, the CEO of Vkusno I Tochka, disclosed that the company achieved its break-even point in autumn 2022, despite incurring various expenses, including rent and salaries, during the three-month period following McDonald's departure and the subsequent rebranding and reopening of the outlets.

“When we started operating as Vkusno I Tochka on 12 June last year, the businesses opened gradually, and the entire chain was fully operational only by the end of September,” Paroev explained. “At that time we were working with a limited menu and set of services. But for all that, from autumn onwards, we reached the break-even point, and as far as plans for this year are concerned, we plan to run it at a profit.”

According to Paroev, the company's biggest difficulties have been replacing popular menu items from McDonald's, such as the Big Mac and Happy Meal, and managing increased costs while striving to maintain a low-cost business model and generate profits.

“The ruble exchange rate has risen, we are no longer part of a large corporation so we no longer receive the substantial discounts for volumes, and logistics are now becoming a very significant factor in production costs,” he explained. “The average increase in the cost of our products for the whole year has not exceeded 4%. It is very important for us to remain affordable.”

Despite experiencing initial growing pains when the chain first opened, Vkusno I Tochka's popularity has continued to rise. Concerns about a potential decline in quality control and the standard of produce, in comparison to McDonald's renowned consistency across different locations worldwide, have proved unfounded. Furthermore, after months of struggling to develop the sauce, Vkusno I Tochka has successfully introduced its own copy of the iconic Big Mac, named the Big Hit. The restaurant now even offers seasonal promotional items, such as the current Spanish-themed 'Barcelona Burger' that includes beef, bacon and Emmental cheese.

However, despite a nationwide advertising campaign, constant TV commercials and collaborations with high-profile actors Yulia Peresild and Miloš Biković, most Russians still continue to refer to Vkusno I Tochka by its old name.

“It tastes the same, it looks the same and all the menu items I like are still on sale,” one student in Vkusno I Tochka in Moscow’s Bauman Region told bne IntelliNews. “So I still call it MakDak.”

bne IntelliNews' correspondent in Moscow also had the opportunity to try the Big Hit and verified that it tastes identical to McDonald's classic Big Mac.

Vkusno I Tochka is not the only Western fast-food brand to have undergone a rebranding and name change in the past year. In April, former KFC restaurants in Russia began reopening under the new name Rostic’s. This change took place after Yum! Brands, the US owner, completed its exit from Russia and transferred the rights to a local company named Smart Service. Despite the rebranding, Smart Service has chosen to retain its employees, suppliers and the KFC menu, with only a few dishes receiving new names. The distinct red-white colour scheme and the iconic KFC buckets, which have become synonymous with the brand, will also remain unchanged. Over the next 18 months, the company plans to convert all KFC locations in the country to Rostic's.

Other changes include Stars Coffee (Starbucks) and Pizza N (Pizza Hut).