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GLOBALIZATION IN ACTION McComrades

9 November, 2015 - 12:17

It is something of a McTriumph: last month McDonald's opened a branch in Belgrade, its first in the communist half of Europe. The really hard part was not getting approval from a communist government; it was growing the potatoes and finding the ketchup.

Although Yugoslavs produce tomato paste, tomato puree and tomato sauce, they had never heard of tomato ketchup. Yugoslavs also grow potatoes, but McDonald's potatoes are an Idaho variety called Russets. Russets make fantastic French fries, but are difficult to grow. They need to be planted in even, spaced rows and watched over with care.

To break into Belgrade, McDonald's turned to Genex, a Yugoslav farmingtourism group. The two set up a joint venture in which each side owns 50% of the equity. Since Yugoslav dinars cannot be converted into hard currency, McDonald's agreed to receive its profits in the form of Yugoslav foodstuffs for its West European restaurants.

McDonald's sees Eastern Europe and the Soviet Union as a growth market. Elsewhere the fast-food market is reaching the point where McDonald's is left looking for new outlets in unusual sites such as hospitals. Communist Europe, however, has millions of frustrated fast-food freaks. This month McDonald's is opening its first branch in Budapest. Moscow could be next. Within two years, there could be as many as 18 McDonald's outlets in Yugoslavia alone.

For that to happen, Yugoslav farmers must produce McDonald's-quality products. So far they have managed with meat and cheese. The Russet potatoes proved harder. It took three growing seasons to get something close to the original, and too many still turn out soggy. Ketchup was even worse. McDonald's prefers a sugary recipe, and Yugoslavs have not yet managed to master the right mix. Hungarian ketchup, on the other hand, is said by McDonald's men to be excellent. In both countries, one product was easy to find: CocaCola. It has been on the East European market for years.

SOURCE: "McComrades," The Economist, April 16, 1988, 58. Reprinted with permission.