Meat Industry INSIGHTS Newsletter

971026 McDonald's Spends $1 Billion in Latin America

October 7, 1997

CHICAGO - McDonald's Corp., which continues to emphasize its international operations in the face of intense U.S. competition, said Wednesday it will invest $1.0 billion in Latin America over the next three years.

The investment will double the number of its fast-food restaurants to about 2,000 in Latin America by the end of the year 2000.

"We've accelerated our growth in Central and South America (and) Mexico because of the economic and political stability and the increase in the purchasing power of the middle class," Ed Sanchez, who oversees Latin America as senior vice president of McDonald's International, said in a telephone interview.

McDonald's $1.0 billion investment in Latin America -- which spans Mexico, Central and South America and the Caribbean -- includes a previously announced plan to spend more than $500 million over the next four years in Brazil. There are currently about 400 McDonald's restaurants in Brazil.

McDonald's, with about 22,000 restaurants worldwide, including nearly 10,000 outside the United States, now operates in 27 countries in Latin America. It added its latest country, Ecuador, on Wednesday with a restaurant in the capital city of Quito.

Sanchez said McDonald's also plans to establish its first restaurants in Bolivia in mid- to late October and Suriname before the end of the year.

McDonald's Latin American operations will contribute $1.5 billion to its systemwide sales by the end of the year and will contribute about 8 percent of the company's operating income in 1997, Sanchez said.

In 1996, operating income from Latin American operations totaled $113.7 million, about 4.3 percent of McDonald's total operating income of $2.63 billion. McDonald's systemwide sales in 1996 totaled $21.02 billion.

The Oak Brook, Ill.-based company opened its first Latin American restaurant in Puerto Rico in 1967.

McDonald's Latin American expansion mirrors growth in the company's international business overall. In 1996, nearly 60 percent of its overall operating income came from international operations.

"I think there definitely will come a time when 80 percent of our profits come from outside the United States," James Cantalupo, president of McDonald's international operations, said in a recent interview.

Of the 2,400 restaurants that McDonald's expects to open this year, 80 percent will be overseas.

McDonald's international operations, which now span 105 countries, have taken on increased importance as the company's U.S. operations encounter intense competition from fast-food rivals.

Burger King, the No. 2 hamburger fast-food chain behind McDonald's, has become a more aggressive competitor in the United States. Last month, it launched its "Big King" hamburger, which it bills as a larger version of McDonald's signature Big Mac sandwich. Burger King is owned by Grand Metropolitan Plc.

McDonald's international presence, which dates back more than 25 years, also has put it ahead of fast-food competitors that are also expanding overseas, according to analysts.

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