Yakov Peer Hamburger Russian About the new Russian fast food 27.11.2022, 08:33

After the announcement that McDonald’s was going to be pulled from the market, the reaction of the society was very emotional and even panic-like: How can we live without hamburgers? As a result, the issue even had to be addressed at the government level. As we see now, the fears were greatly exaggerated. And if foreign fast food chains are completely closed, nothing terrible will happen: Russian restaurant operators can quickly take a share of foreign players in the market. Only our consumers will benefit from this.

For some reason, many people think fast food is the newly minted “Delicious – that’s it” or, worst of all, Burger King with KFC. However, the situation has changed drastically in recent years. Since the official appearance of fast food in the USSR (the first McDonald’s opened in 1990), Russian restaurant operators have also begun to explore this sector. Here’s what the market looks like right now.

According to our research, the “Big Three” – it’s Tasty – and that’s it, Burger King, KFC – the share of foreign companies is currently about 50%. When a family comes to the cafeteria, they spend plus or minus 350 rubles per person. This money is usually distributed as follows: half goes to foreign companies, about a third to large Russian chains, and about 15-20% to regional restaurants.

This situation has continued until recently, but may soon change drastically. I expect an increase in the share of Russian networks and a decrease in the market presence of the Big Three companies. It’s hard to name specific numbers at the moment, but it’s already clear that the process is ongoing. Only consumers will benefit from this. What is my trust based on?

Our restaurant business has come a long way in three decades, taking decades in some countries. And there is a logical explanation for this.

In Russia, a combination of several positive factors worked. Firstly, the development of the industry went almost from scratch (Soviet canteens could be ignored), and this has undeniable advantages. From the very beginning we were free to choose formats and tried to make it even better at home, borrowing from foreign experience. As a result, there are fast food establishments on the market that don’t use frozen meat (only fresh), don’t take bread with them (cook themselves), and prepare a fresh meal within 5-7 minutes after ordering. At the same time, they keep prices comparable to “foreigners”. I studied how fast food works in different countries and I can say that you will not find anything like it abroad.

Second, we have one of the strongest education systems in the world (whatever they say about it). I studied abroad and have reasons to compare. As a result, we have many talented businessmen inventing and creating restaurants of various formats.

Third, despite the obvious diversity, we still have many opportunities for the implementation of our projects: there is still enough room for everyone. Suffice it to say that one of the formats has no rivals of a large foreign network. You can come and start a similar business.

And most importantly: our consumer is extremely demanding on service and product quality, and also puts the highest demands on service. Again, this is not the case abroad: fast food in European capitals is visited by people with very modest incomes. And all because the inside is quite messy, the food is tasteless, the service is long.

All these factors together set a high bar for local restaurant operators. And we can already say that we have reached this height. The share of fast food has increased in recent years. According to VTsIOM estimates, in 2010 19% of Russians regularly visited such establishments, in 2022 – almost 40%. And almost every other person does this at least once a year. Even in this difficult period, the sector did not sink. Thus, according to the results of the first half of 2022, the turnover of catering establishments increased by 1.4 percent compared to the same period of 2021. According to VTB, in the six months of this year Russians spent 16% more than in the first half of 2021.

The more diverse the restaurants, the lower the prices.

Now a very interesting situation has developed in the market. On the one hand, there is a desire of Russian fast food chains to remove the Big Three companies from their positions, especially since all conditions have been created for this. I expect very interesting events to happen in this industry: companies will announce regional expansion, businessmen will attract investments to expand chains, and restaurants will open in new formats, and mergers and acquisitions will take place in the market.

On the other hand, we see that the consumer will spend less and want to buy more than before due to objective conditions. The average control in the fast food industry may drop a bit. And in order to get this money, restaurant operators will need to provide the most favorable conditions to their customers, at least in the short term. What does this mean in practice?

Restaurant operators will be forced not to increase the price of their meals or to limit themselves to very modest increases (below the inflation rate). Plus, in this battle for the customer, the strongest will survive, namely those who offer both high-quality service and fast service, and offer additional bonuses (various promotions and special offers) for guests. As a result, the general level of fast food restaurants will rise. From now on, some of the customers who prefer classical format restaurants will switch to fast food after a while. However, this is already happening. Classic restaurants are already losing customers, as the Ombudsman for the Moscow restaurant market recently reported. In March, revenue in the upper price segment fell by 50%, and in restaurants in the middle segment, by 10-20%.

A window of opportunity is now opening for Russian restaurant operators working in the fast food industry. By creating more attractive conditions for our guests, we can seriously drive foreign competitors out of our positions and create several strong national fast food chains.

The author expresses his personal opinion, which may not coincide with the editors’ position.