A little piece of news from Iceland today, on the heels of that country’s worst economic crisis ever it looks like the Big Mac is dead there as well. Soaring inflation and the devaluing of Iceland’s currency (the krona) against almost all other currencies is prompting the close of McDonald’s fast food restaurants there. It matters little how many the world’s largest “burger joint” has served now, they won’t be serving any more.
The owner of the three McDonald’s restaurants in the Island country will be forced to close them basically because his food cost has gone sky high, and people in Iceland are both unable and unwilling to pay any more for Mc-anything. Iceland’s woes continue as their currency has lost over 70 percent of its value before the current economic crisis. Mr. Ogmundsson had this to say to reporters from The Globe and Mail:
“With the collapse of the Icelandic krona, our food costs have doubled. Business is good, but the bottom line is not sexy.”
According to this report, Mcdonalds is not exactly thrilled at being dropped off the “fast food menu choices” for Icelandic people either. The chain has been doing business there for over 16 years, and for companies who have built their revenue and brand from being internationally successful, going backwards is hopefully not a sign of the times. In a statement from the fast food giant the “bottom line” for any business, including McDonalds is apparent:
“The very challenging economic climate in the country makes it financially prohibitive to continue the business.”
Just to stay in business Ogmundsson would have to increase the cost of a Big Mac to something on the order of $7.50 just to break even. The spiraling cost of everything coming into Iceland is virtually prohibitive of doing any kind of business except those of necessity. Burger King has already pulled out of Iceland, and the only chains which seem viable are those which rely on local ingredients and support for their success; Taco Bell, KFC, and Pizza Hut being at the top of that short list.
Though this story may seem like an isolated and localized problem for McDonalds and other such businesses, this writer would bet there are far more examples of “failures” like this on the horizon. As the full weight of this current economic collapse is felt over time, I think we can expect to see many companies like McDonald’s in some sort of “death spiral” of retraction in the global marketplace.
In Germany awhich is a Big Mac meal is about the equivalent of $9 US. Expect the penny pinching German conservative to drive under the golden arches less and less too. With “advertised” growth not really telling the tale after the dramatic decline last year, where will the end of this economic nightmare end. For McDonald’s it is sure they do not want to constrict all the way back to Illinois back in 1955. We shall see. Meanwhile, for the Big Mac attack in Iceland? We can only say a prayer for those die hards.