The Evolution of Private Enterprise: Russian McDonald's Edition

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McDonaldsRussia McDonald's is celebrating its 20th anniversary in Russia this week. One of the most interesting aspects of McDonald's' Russian adventure is the evolution of its supply chain, which has developed remarkably in the past 20 years. Today, McDonald's sources all of its ingredients from outside purveyors, an 180 degree shift from when the company opened its first outlet in 1990:

The company celebrated a different milestone earlier this year by outsourcing the last product — hamburger buns — it had made at a proprietary factory outside Moscow called McComplex. It was built before the chain opened its first restaurant. Nearly everywhere else, McDonald’s buys ingredients, rather than making its own. But in the Soviet Union, there simply were no private businesses to supply the 300 or so distinct ingredients needed by a McDonald’s outlet.

Everything — from frozen French fries to pie filling — had to be made from scratch at a sprawling factory.

In the 20 years since McDonald’s arrived in Russia, enough private enterprises have sprung up to supply nearly every ingredient needed to operate one of its restaurants.

Today, private businesses in Russia supply 80 percent of the ingredients in a McDonald’s, a reversal from the ratio when it opened in 1990 and 80 percent of ingredients were imported.

McDonald's restaurants in Russia employ 25,000 workers, while its suppliers provide roughly 100,000 jobs.

Perhaps The Economist should come up with a supplement to its Big Mac index. Instead of purchasing power parity, the index could measure the level of private sector development by looking at the McDonald's supply chain.

(H/T Tyler Cowen. Photo credit: Barrybar)

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