What is in this article?:
- Crimea crisis complicates restaurant business in Russia, Ukraine
- Working with local partners
- Expansion plans on hold
The current conflict presents unique challenges to Western businesses, including restaurants, which have been monitoring the situation closely.
Expansion plans on hold
Before the adversarial relationship between Russia and the United States reignited the past few months, Russia had been considered a hot growth market or potential new market for many Western businesses.
According to The NPD Group, the Russian foodservice market experienced a 7-percent increase in traffic in the fourth quarter of 2013. That increase led all the major countries tracked by the market research firm, besting 2-percent growth in traffic in Great Britain and 1-percent traffic growth in Australia, the only other big markets to increase their total restaurant visits during the period, NPD found.
According to data gathered by Euromonitor International for Nation’s Restaurant News’ first International Top 25 report, Russia accounted for slightly more than one-half of total restaurant chain sales in the Eastern Europe region and around one-third of overall foodservice spending in the region. Four of the top five largest foodservice companies in Eastern Europe are based in Russia.
The report found that Russia’s restaurant industry was slower to develop after the fall of communism, which has allowed many Western brands to expand quickly with fewer native chains or independent restaurants as competition.
But now, Snead of Rosinter and Shattuck of Focus Brands said the environment in Russia remains one of a “wait and see” attitude, where their restaurants have plans in place if tensions escalate further but for now are carrying on as usual.
Things are far less stable on the other side of the conflict over Crimea, they said.
Focus has one Cinnabon location in Ukraine, in Kiev, Shattuck said, and the uncertainty in the country has caused a noticeable lack in consumer confidence. Focus had planned some growth in Ukraine this year before the protests metastasized into the current conflict, but those plans are now on hold, Shattuck said.
The situation is more dire in Ukraine than in Russia at Rosinter’s four restaurants in Kiev, because unlike in Russia “there is much more of a fear factor” among the millions of Ukrainians living in and around the capital, Snead said.
“We’re having difficulty keeping the other three [restaurants in Kiev] open intermittently, because either people are afraid to come down there or employees are worried they won’t be able to get home,” he said. “That element is likely to go on for a while.”