Fast-food giant McDonald’s has more than 36,000 outlets in over 100 countries worldwide. But in Africa, with 54 economies and a population of around one billion, McDonald’s has only expanded to four markets – South Africa, Egypt, Morocco and Mauritius.
However, speaking at the Retail Congress Africa in Cape Town yesterday, McDonald’s South Africa CEO Greg Solomon said the fast-food retailer’s decision to expand to the next African market will be based purely on supply-chain factors. He noted there is an opportunity to deploy the existing supply chain in South Africa to access markets further north.
“There are smaller markets that are easy to get as you take the supply chain further up. But the ‘big gold’ is way up north and so we may not make an obvious move and go for the big player. We may make an un-obvious move and go for a supply chain-motivated decision.”
However, Solomon added it’s a matter of time before McDonald’s enters Nigeria, and the decision will be based on when the corporation has been able to establish the supporting supply chain infrastructure, such as adequate potato production.
“It is not about if, it’s about when,” he said, adding that McDonald’s takes a market dominance strategy to solidify its footprint and brand strongly in any new market.
“When entering a new country, whether global or African, I guess you either have to be first or you have got to be best.”
Combating challenges in South Africa
“But for me it is all about balance. The balance between our arrogance to conquer Africa and our being complacent in our backyard. The balance between our patience versus our persistence,” continued Solomon.
McDonald’s is in its 20th year of being in the South African market. However, according to Solomon, innovative thinking is required in the current economic climate to ensure the business remains profitable.
“When your input costs continue to increase at high single digits and your GDP is only growing at 1% or 2%, you have an unsustainable business model. As leaders we need to challenge ourselves on how we drive profit into the organisation.”
In addition to its well-known products such as the Big Mac, McDonald’s adapts its menu to cater for national and even regional local tastes to attract consumers.
“So what we may deploy in KwaZulu-Natal to what we may deploy in Johannesburg versus in the Western Cape will be completely different product offerings,” he highlighted.
“You have to listen to your consumers and evolve your brand in that way.”