WITH $27 billion in revenues, daily customer traffic of over 60 million people and a presence in more than 100 counties, employing 761,000 people globally, McDonalds is a true food giant. It is the biggest food chain in the world with 34,000 restaurants world-wide, selling 75 burgers every second.
McDonald’s market penetration is impressive, but looking at its international outreach one continent distinctly lags behind.
In 1992 McDonald’s opened its first restaurant in Africa – in Casablanca, Morocco. “Conquering Africa”, as the move was then dubbed, made McDonald’s present in all continents except Antarctica. Two years later, in 1994, Egypt’s capital received its first taste of the world-famous fast food chain, followed by South Africa in 1995, after the fall of apartheid.
Since 1995, however, McDonald’s has not spread to any other country in Africa, remaining with roughly 296 restaurants on the whole continent. That is less than its restaurants in New York City alone. Of course, the average purchasing power in Africa is incomparably lower than all western and most Asian and South American countries. But McDonald’s is present in places like Fiji, Samoa, Northern Marianas and Suriname – tiny countries and territories with limited customer base.
What has stopped it from reaching the continents’ giant - Nigeria - with a population of over 170 million? Why is it not in Nairobi, one of the fastest growing cities in the world and an East African hub? And why is in not present in other African cities with considerable number of rich and middle class inhabitants only waiting to sink their teeth in the staple Big Mac?
What drives the burger
There are those who would say McDonald’s absence, given that it has an army of critics who consider its food dangerous junk, is a blessing. That, however, still doesn’t answer how Africa became “blessed” by McDonald’s absence. There are some pointers, though.
Except the economic and political stability - two necessary components for successful operation of a chain like McDonald’s (which in Africa disqualifies quite a number of countries) – two other data sets are of vital importance to its international team.
Daily caloric intake and food crisis.
In terms of consumption of calories Africa looks bleak. A great majority of countries consume less than 2,250 calories per day. The average for central Africa is only 1,800 calories per day – slightly more than one Big Mac menu.
In Europe, North American and Australia the average caloric intake per day is about 3,700, or a third larger. The three African countries in which McDonald’s is present – Morocco, Egypt and South Africa – have an average daily consumption of calories of between 3,000 - 3,500. Much closer to western countries.
Looking at Maplecroft’s international food security index (2013), which takes into consideration such indices as water security, energy security and a comprehensive mix of resource security measures, we see an overwhelming African presence. With the exception of Afghanistan no other country outside Africa is ranked at “Extreme Risk” of food insecurity. On the continent there are seven such countries: Sierra Leone, Chad, South Sudan, DR Congo, Ethiopia, Eritrea and Somalia.
On the other hand, Africa boasts only several countries with food insecurity ranked at medium and those countries include Morocco, Egypt and South Africa.
Rules of the burger – how to open a chain
Following the caloric intake and food security indicators and correlating them against economic and political stability excludes a great majority of African countries from contesting for a McDonald’s franchise.
But several others still remain in the race, notably Nigeria, Kenya, Zimbabwe and Ghana. Unfortunately, there are a number of other constraints to enjoying a McDonald burger.
Kenya, which has recently passed the threshold to become a low-middle income country according to World Bank, should be a natural destination for McDonald’s. And maybe it will. So far, however, it faced one main issue - difficulty of tracing the supply chain.
This shortcoming, common to many developing countries, is of crucial importance. If the restaurant cannot guarantee a safe source of its primary product it runs tremendous risks of quality fraud. In the case of a food giant like McDonald’s this may mean losing millions of dollars due to court cases and deterioration of name and image.
The available Kenyan food suppliers have failed to be 100% secure in the eyes of McDonald’s demanding international team of experts.
Promising to provide a global quality of its food, McDonald’s faces a continuous challenge. In Nigeria frequent power cuts have been declared an “embarrassment” for many years. The country produces only about 40% of its total energy needs. As a result sustainable, undisturbed production is difficult and costly (if fuel generators ought to be used as backup).
The unreliability of energy has been the main deterrent to McDonald’s entry in Africa’s biggest economy.
The company also tried entering Zimbabwe in 1999, but due to the political unrest which occurred that year, followed by unprecedented inflation, cancelled the plans. The erratic behavior of President Robert Mugabe over the years hasn’t given McDonald’s much hope.
After close consideration Ghana’s average disposable income has been declared too low by McDonald’s to enter the market. In 2011 the company acknowledged that it would struggle to establish a regular base of customers in the country.
Despite food insecurity, McDonald’s has been interested in entering Ethiopia, but the country’s diversity makes it difficult to create a standard menu and rely on a consistent demand. Majority of the population is fine with eating red meat, but not pork – forcing the restaurant to introduce turkey bacon. More complex still is the issue of addressing the largest Ethiopian minority – the Orthodox Christians.
Their requirements include a Kosher way of dealing with animals, posing a considerable complication for McDonald’s, though possible to overcome. However, the 250 days of fasting during the year, required from believers, renders the prospect of successfully conquering the market for a food chain like McDonald’s dreary, to say the least.
McDonald’s is currently in the process of entering Tunisia, its fourth African country. The planned opening is scheduled for late 2015.
Tunisia matches the restaurant’s outlook perfectly – it is stable both politically and economically and has a calorie intake similar to that of Egypt. It is also ranked to have “medium risk” of food insecurity.
Neighbouring Algeria would also qualify if it wasn’t for its socialist regime which discourages most international companies due to unfavourable ownership laws.
The sheer necessity to provide a standardised quality across the globe makes opening a McDonald’s restaurant complicated. All compulsory resources must be available in the right quality, in the right quantity and in the right time, unhindered by external pressures.
McDonald’s is merely calculating risks versus its profits - so far for most of Africa the numbers come in at a loss.