Bloomberg News

McDonald’s Says Russian Agency Is Inspecting 100 Restaurants

August 29, 2014

RUSSIA MCDONALDS

A pedestrian attempts to look through the windows of a closed McDonald's Corp. restaurant, the first to open in the Soviet Union, on Pushkin Square in Moscow, Russia, on Thursday, Aug. 21, 2014. Photographer: Andrey Rudakov/Bloomberg

McDonald’s Corp. (MCD:US), facing mounting scrutiny from Russia’s consumer-safety agency, said more than 100 of its restaurants are now being inspected in the country following the forced closing of 12 locations.

McDonald’s temporarily shut four restaurants in Krasnodar, in southern Russia, on an order from the Rospotrebnadzor agency, according to Svetlana Polyakova, a Moscow spokeswoman for the Oak Brook, Illinois-based company. The chain previously closed eight other outlets since Aug. 20 -- including Russia’s first and largest McDonald’s, located in central Moscow.

Rospotrebnadzor has cited McDonald’s violations of sanitary regulations, though the timing and scope of the move have raised concerns that it’s a response to Western sanctions on Russia. The attitudes of Russian people also have turned against American companies following a territorial dispute over Ukraine and the Crimean Peninsula, said Yulia Bushueva, a managing director at Arbat Capital.

“All this situation with Ukraine and Crimea has boosted the anti-American mood in the society,” she said. “When state TV is telling you that U.S. staged a coup in Ukraine and is seeking to do the same in Russia, people get united against an external enemy.”

Changing Views

Many Russians are now convinced that McDonald’s sells harmful food and deserves to be closed, she said. That’s a turnabout from the chain’s arrival in what was then the Soviet Union in 1990, when it drew long lines and was seen a symbol of the nation’s rising prospects.

“For a certain part of Russians, McDonald’s -- whose first restaurant in Moscow opened before the collapse of USSR -- was associated with the first step of opening the country for business and for foreign capital,” Bushueva said. “These people may now see closure of McDonald’s as a step into the opposite direction.”

Shares of McDonald’s, which has more than 35,600 restaurants globally, fell 0.4 percent to $93.75 as of 10:03 a.m. in New York. The stock had declined 3 percent this year through yesterday.

The U.S. and European Union imposed sanctions against Russian companies and officials after President Vladimir Putin annexed Crimea earlier this year, escalating the worst standoff between the two sides since the Cold War. In response to the sanctions, Putin banned $9.5 billion in food imports from Western countries.

McDonald’s, which said it has total of 440 restaurants in the country, is now caught in the crossfire, said Sabina Mukhamedzhanova, a fund manager at Promsvyaz Asset Management in Moscow.

“It’s Russian retaliation to the sanctions -- first it was a ban of food imports and then McDonald’s,” she said. “This is a prominent symbol of the U.S. It has a lot of restaurants and therefore is a meaningful target. I don’t recall McDonald’s having consumer-safety problems of such a scale in over more than two decades of presence in Russia.”

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Celeste Perri at cperri@bloomberg.net


China's Killer Profits
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $92.71 USD
    • 1.06
    • 1.14%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus