With US Ties in Deep Freeze, Russia Continues to Target McDonald's

by Kathy Jones on  October 23, 2014 at 1:15 PM Lifestyle News   - G J E 4
Russian authorities show no sign of halting a clampdown on US chain McDonald's. This clampdown was launched after the West slapped sanctions on Moscow over its meddling in Ukraine.
 With US Ties in Deep Freeze, Russia Continues to Target McDonald's
With US Ties in Deep Freeze, Russia Continues to Target McDonald's

Ten outlets of the symbolic American eatery are now closed, McDonald's said Wednesday, months after the country's consumer watchdog began inspections at almost half of the burger giant's 451 restaurants nationwide.

The hit to operations -- compounded by the closure of three branches on the Black Sea peninsula of Crimea, snatched by Moscow from Ukraine in March -- contributed to a miserable third-quarter for the global behemoth, as profits slipped on the back of a quality-control scandal in China and tougher US competition.

McDonald's woes began in August when Russia's food safety agency Rospotrebnadzor launched inspections at over 200 outlets across the country over alleged "consumer fraud".

The move came after the US and EU ramped up sanctions against the Kremlin as East-West relations plunged to their lowest since the Cold War over Moscow's backing for a separatist rebellion tearing apart east Ukraine.

Russia responded by slapping embargoes on most food products from the West but that appears to have been just for starters.

Local media has widely seen the crackdown on McDonald's as further retaliation against the Western sanctions that hit Russia's already faltering economy.

Kommersant daily reported that Rospotrebnadzor's offensive is being carried out under the Kremlin?s orders.

McDonald's meanwhile says that it has got a raw deal and is appealing the court decisions to close its branches.

"We will do everything possible to continue the successful work of our company in Russia," McDonald's said in a statement Wednesday.

- Going after Ronald -

The closures -- which include the chain's flagship store in central Moscow -- are not the only belly ache for McDonald's.

Its eateries in a number of provincial towns have been fined thousands of dollars for the "illegal sale of toys" in their children's menu Happy Meals.

McDonald's has also said the Russian authorities are seeking to ban some of its staple products, such as cheeseburgers and milkshakes, accusing the company of cheating on the energy value of the food.

In early October Russia prosecutors also launched checks into the activities of the Ronald McDonald House charitable fund -- which runs health projects for children around Russia -- on suspicion of embezzlement.

Rospotrebnadzor has denied that its campaign is part of a "global plan" to put pressure on the manufacturer of Big Mac -- a symbol of globalisation hated by Russian nationalists.

Rospotrebnadzor said that "repeated violations" of nutritional and safety norms -- such as excess concentration of fats and carbohydrates or dangerous bacteria found in McDonald's products -- made for a court to order a temporary closure of some of its outlets.

McDonald's has won some respite against the claims -- convincing a court to overturn a sales ban on its two outlets in the town of Veliky Novgorod in a rare victory.

The fast-food giant's Russian troubles come at a difficult time for the company which reported on Tuesday that its profit slumped in the third quarter as global sales fell amid a food-safety scandal in China and intense competition in the United States.

The chain says it is still continuing to either employ workers from its closed restaurants or to pay them a portion of their wages.

The group has invested heavily in Russia since it opened to much fanfare in the then Soviet capital in 1990, and currently employs over 39,000 people in the country.

Its operational profit stands at some $331 million (260 million euros), according to Morgan Stanley.

And rather than scaling back since the start of the onslaught by authorities, the chain says its keen to bolster its business in Russia.

In 2015 McDonald's plans to expand operations in Russia's vast Siberia region, opening over 60 new outlets and creating some 15,000 new jobs.

Source: AFP

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