MOSCOW — Earlier in his career, Christopher Wynne put his Russian expertise to work researching arms proliferation for the U.S. government. Now he does geopolitics of another sort: deploying U.S. fast food for the emerging Russian middle class.
Wynne is the top franchisee in Russia for the Papa John's Pizza chain. His competitors include the U.S. chains Sbarro and Domino's, plus a Russian upstart, Pizza Fabrika. But so far, in contrast with the mostly saturated U.S. market, Wynne sees plenty of Russian demand.
"I could succeed in my sleep — there is so much opportunity here," said Wynne, who has just opened his 25th Papa John's outlet in Russia, doubling the number in the past year.
American fast food has been going global for years, of course. China and India continue to be big expansion markets. But lately the industry is finding a growing appetite in Russia — for not only pizza but also for Burger King's Whoppers, Cinnabon's Classic Rolls and Subway's barbecue pulled-pork sandwiches, among others.
"As consumers have more disposable income, they will spend it on fast food," said Jack Russo, an analyst of the industry for Edward Jones. He compares the market here to the U.S. half a century ago.
For years, McDonald's — which opened its first restaurant on Pushkin Square in 1990 — was the only U.S. fast-food chain in Russia. Its restaurants in the country now number 279 and growing. But other chains are flocking in:
>> Burger King has opened 22 restaurants in two years.
>> Carl's Jr. has 17.
>> Wendy's has two and plans to have 180 by 2020.
>> Subway has opened about 200 sandwich shops, working through several franchisees.
>> Yum Brands, which owns KFC, Pizza Hut and Taco Bell, operates a co-branded chicken restaurant chain in Russia, called Rostik's-KFC, and Il Patio in the Italian food segment. Yum now has about 350 restaurants in Russia.
Paving the way has been the development in many Russian cities of the modern infrastructure needed for fast food to flourish — including malls with food courts, highways with drive-thru locations, and specialty suppliers of frozen foods and packaging.
Moreover, Russian consumers are increasingly affluent, partly because of the trickle down from the nation's lucrative oil exports. Although they still trail average U.S. household income — $43,539 in America vs. $7,276 here — Russian consumers tend to have a large portion of their money for discretionary spending.
They don't have the hangover of consumer debt that has curbed Americans' purchasing power. Nor do Russians have high medical bills, because the health care system, if flawed, is largely socialized. The income tax is a flat 13 percent. And most Russians own property mortgage-free, as a legacy of the mass privatization of apartments in the 1990s.
As a result, the fast-food chains find they can charge higher prices in Russia than in America. The average check at a Russian outlet — $8.92 according to research by a Wendy's franchisee here — is higher than the U.S. average of $6.50.
A large "the works" at Papa John's in Moscow runs $21.62. The same pizza in the company's home base of Louisville, Ky., costs $14.
"The bottom line is the opportunity is here," said Wynne, who told prospective investors this year said the Russian operation had 21 percent annual revenue growth in stores open more than a year. Papa John's does not disclose its average sales per restaurant but says the figure is higher in Russian than in 34 other countries where the chain operates.
Wynne, 34, speaks fluent Russian and holds a master's degree in international affairs from George Washington University. He was formerly in the U.S. National Nuclear Security Administration, but in 2007 he sensed the time had come to beat swords into pizza pans. He acquired 51 percent of the Papa John's Russian franchise.
He says it costs about $400,000 to set up a store in Moscow. The store can turn an operating profit within three months. The enterprise is well-financed, with a $10 million loan at 7 percent interest from the U.S. Overseas Private Investment Corp., an agency whose job is to encourage U.S. exports.
So far, Moscow, a city of 13 million, has only about 300 pizza restaurants. Manhattan, population 1.6 million, has 4,000. That, for Wynne, is a market begging to be mined, which Papa John's is doing partly with advertising that focuses on pizza delivery to men ages 25 to 35. Because pizza can be delivered with beer here, a free bottle is sometimes part of the promotion.
Not everything has gone smoothly for Wynne. Russia's weak courts and poor protection of intellectual property rights have posed problems for all U.S. chains. Papa John's settled out of court with a Moscow restaurant that called itself Papa John's by persuading the owner to rename his location Papa's Place.
And not all Western food enterprises succeed here. Some companies have stumbled over cultural differences difficult to anticipate.
Campbell Soup, for example, left Russia this year because of soft sales of four flavors of soup stock sold in pouches. It had seemed a sure bet because the varieties included a broth that could cut the labor time for making borscht. As it turns out, Russians prefer to build their borscht from scratch.
On the other hand, Papa John's hottest-selling pizza this spring was a recipe made especially for the local market but found in no Russian cookbook: a topping of blue cheese, chicken, celery and Tabasco sauce.
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