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Scrounging for Soviet Food, McDonald’s Starts at the Farm With AM-Soviet-Economy, Bjt

January 29, 1990 GMT

MOSCOW (AP) _ McDonald’s imported seeds, taught Soviet potato farmers how to increase their yields, built its own food factory, spent $50 million and waited 14 years before selling a single burger in Moscow.

George Cohon, chairman of McDonald’s of Canada, doesn’t have any idea if or when he’ll recapture his investment after the opening of the first franchise in the Soviet Union on Wednesday.

″I just know I’m going to take those rubles and build another restaurant,″ he said.

The restaurant, located near Pushkin Square, is the biggest McDonald’s in the world and is designed to serve 1,250 people an hour.

Unlike other foreign ventures, the restaurant will sell its food for rubles, so that ordinary Soviets, not just privileged foreigners, can eat there. A second McDonald’s, out of a planned 20, will sell for hard currency to foreigners.

Anybody who thinks it was easy to get this far need only glance at the abandoned storefront a few miles away, its ″Pizza Hut″ sign mocking Pepsico’s proud announcement that it would open a restaurant in Moscow in 1988.

The depth of McDonald’s investment in the Soviet market can be measured not only in currency but in the lengths it went to ensure a reliable Soviet food supply.

Agronomists brought in seeds and taught Soviet collective farmers who’ve planted potatoes for years that they could improve their yields 20 to 100 percent using modern methods, Cohon said.

To avoid losing 25 percent or more of the harvest to spoilage, McDonald’s taught farmers how to pick potatoes gently and store them properly. Purchasing manager Vladimir Boras said the company developed its facilities near Moscow because it couldn’t build a new transportation network.

A few weeks ago, Boras knelt in the black earth of a greenhouse on the outskirts of the capital and examined the green budding heads of iceberg lettuce used in a Big Mac. Above, 400-watt bulbs blazed along the rows, making up for the short days and cloudy skies of midwinter Moscow.

The electric bill was $8,300 in December, said Vladimir Goloveshkin of the Dzerzhinsky Farm, but Boras wasn’t sure the lettuce would be ready for the grand opening.

He’d tried an experimental crop of lettuce months earlier at a different collective farm, he said, but when he arrived to examine it, the farmers had eaten the entire harvest.

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″They said it was delicious,″ Boras recalled.

Not all supplies are Soviet-made. The warehouse is brimming with imports, including paper cups, napkins, bags, spices and secret ingredients such as ″McDonald’s Crust Improver.″

Up to now, Gorbachev’s economic reforms have had little effect on Soviet consumers, who complain bitterly of empty store shelves and the ridiculously high prices charged in private markets. But the new climate opened the way for McDonald’s to form a partnership with the Moscow City Council and to contract with collective farms now permitted to sell one-third of their fruits and vegetables on the open market rather than to the state.

Cohon said meat is still distributed by allocation and it took the intervention of the mayor to obtain beef for the fast-food restaurant.

Even so, carcasses must be hand-selected because the local slaughterhouse won’t guarantee McDonald’s the meat from the animals it taught farmers how to raise, Boras said.

McDonald’s also benefited from other foreign investors. A Chicago company built a model dairy to promote its milking equipment, and McDonald’s buys its milk there to avoid the high bacteria counts common in Soviet milk.

But the company built its own water purification system, machine shop and laundry.

For all that, some of the ″Soviet-sourced″ items on the firm’s list turn out to be apples from Bulgaria. With the help of Moscow officials, McDonald’s bought them for rubles after the government imported them.

″It’s a big country,″ said Terry Williams, a quality assurance manager who is one of only three non-Soviets among 150 employees at the food plant. ″There’s a distinct possibility we’ll find a Soviet source next year.″