Monday, October 26, 2009

McDonalds Pulls Up Stakes in Iceland; Will Consumers Survive Big Mac Attacks?




Iceland says goodbye to McDonalds as Customers Wonder Where to Get Help for Their Next Big Mac Attack

McDonald's closes in Iceland as currency collapse takes a bite out of Big Mac profits

By Gudjon Helgason and Jane Wardell, Associated Press Writers
On 3:41 pm EDT, Monday October 26, 2009

REYKJAVIK, Iceland (AP) -- The Big Mac, long a symbol of globalization, has become the latest victim of this tiny island nation's overexposure to the world financial crisis.

Iceland's three McDonald's restaurants -- all in the capital Reykjavik -- will close next weekend, as the franchise owner gives in to falling profits caused by the collapse in the Icelandic krona.

"The economic situation has just made it too expensive for us," Magnus Ogmundsson, the managing director of Lyst Hr., McDonald's franchise holder in Iceland, told The Associated Press by telephone on Monday.

Lyst was bound by McDonald's requirement that it import all the goods required for its restaurants -- from packaging to meat and cheeses -- from Germany.

Costs had doubled over the past year because of the fall in the krona currency and high import tariffs on imported goods, Ogmundsson said, making it impossible for the company to raise prices further and remain competitive with competitors that use locally sourced produce.

A Big Mac in Reykjavik already retails for 650 krona ($5.29). But the 20 percent increase needed to make a decent profit would have pushed that to 780 krona ($6.36), he said.

That would have made the Icelandic version of the burger the most expensive in the world, a title currently held jointly by Switzerland and Norway where it costs $5.75, according to The Economist magazine's 2009 Big Mac index.

The decision to shutter the Icelandic franchise was taken in agreement with McDonald's Inc., Ogmundsson said, after a review of several months.

"The unique operational complexity of doing business in Iceland combined with the very challenging economic climate in the country makes it financially prohibitive to continue the business," Theresa Riley, a spokeswoman at McDonald's headquarters in Oak Brook, Illinois, said in a statement. "This complex set of challenges means we have no plans to seek a new partner in Iceland."

McDonald's, the world's largest chain of hamburger fast food restaurants, arrived in Reykjavik in 1993 when the country was on an upward trajectory of wealth and expansion.

The first person to take a bite out of a Big Mac on the island was then-Prime Minister David Oddsson. Oddsson went on to become governor of the country's central bank, Sedlabanki, a position that he was forced out of by lawmakers earlier this year after a public outcry about his inability to prevent Iceland's financial crisis.

Lyst plans to reopen the stores under a new brand name, Metro, using locally sourced materials and produce and retaining the franchise's current 90-strong staff.

Ogmundsson said it was unlikely that Lyst would ever seek to regain the McDonald's franchise with Iceland still struggling to get back on its feet after the credit crisis crippled its overweight banking system, damaging the rest of its economy, last October.

"I don't think anything will happen that will change the situation in any significant way in the next few years," Ogmundsson said.

It is not the first time that McDonald's, which currently operates in more than 119 countries on six continents, has exited a country. Its one and only restaurant in Barbados closed after just six months in 1996 because of slow sales. In 2002, the company pulled out of seven countries, including Bolivia, that had poor profit margins as part of an international cost-cutting exercise.

BLOGGERS NOTE: What the good folks at Big Mac Inc do not tell us is the fact that they are opening 33,000 new stores in China within the next 10 years....so, er, ah,..how bad can they really be hurting? Hummmmm. Anyways, makes sense to me that they would choose China to expand their operations as McDonald Corp has been buying all their beef from them for all their stores as they DO NOT trust USA beef, - although, it is roumored that they maintain a small supply of USDA Inspected beef and will soon offer a burger made from USA beef and will call it The McMadCow Burger, made specifically for their American tourists and others of the like who simply dont give a dam what they eat or feed their children.

AP Business Writer Jane Wardell reported from London. AP Retail Writer Ashley Heher


http://finance.yahoo.com/news/Iceland-says-goodbye-to-the-apf-2609404079.html?x=0&.v=6

4 comments:

  1. mcdonalds buy's beef from other country's more than (if any ?) from the u.s. the country that put them on the map!!

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  2. The mc donald curve.... Today corporations are so greedy that are willing to do anything to meet new profit hights, but there will be a time when will be nothing else to do besides compromising product quality or safety. In mc donalds case this had alrready happen, Personly I dont eat at mc donalds no more cus their hamburger size are so small that I can believe that cost 3 50...... They give a meet the size of a cuarter, and charge the full 3 dollars.

    One day those greedy corporations will start falling, some new ones will pop up that will offer a product slighty better and costumer will switch sides..... or employees will relize that really is not worth to work for such a small salary, and just will stop doing it..

    The numbers on wall street are just numbers but those a killing the world, corporations will have to find a way treat their employees and costumer better and not exploit and run over then for just a couple of numbers... there is something that is call "enough" and they will have to compromise... or risk loosing their post as the biggest american corporations.

    Personally I dont see any other way to mc donalds to grow besides going full retailer or start selling frozen burgers in supermarquets in poor countries.
    maybe they should try going green by selling canguro or soja burgers in its stores..

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  3. I heard that MickyD's is going to open up THOUSANDS more shops in China. Not suprized since China is MickyDs main beef supplier.

    ReplyDelete
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