Mcdonalds To Spend More Than $500 M In Brazil

McDonalds Corp. said it will spend more than $500 million in the next four years to expand operations in Brazil, as it increasingly relies on international expansion to balance a tough U.S. market. We expect to more than double our presence in Brazil by the end of 2001, Marcel Fleischmann, president of McDonalds Brazil, said in a statement. In fact, we will build more restaurants in the next four years that weve built in the first 18 years of operations.

McDonalds, with more than 22,000 restaurants worldwide, is encountering an aggressive challenge by second-place rival Burger King, a unit of Grand Metropolitan PLC. Burger King has launched in the United States the Big King hamburger, which it bills as a larger version of McDoanlds signature sandwich, the Big Mac.

 

McDonalds reaped nearly 60 percent of its overall operating income outside the United States in 1996 and expects that to grow.

The company did indicate that they were going to deploy a bigger part of their unit development outside the U.S. and I think this reflects that, said Mitchell Speiser, an analyst who follows the company at Lehman Brothers.

McDonalds, based in Oak Brook, Ill., has 270 restaurants and 130 satellite locations in Brazil and is expected to reach annual sales of $800 million this year, the company said.

Overall, McDonalds had $31.8 billion in sales for all of 1996 and $16.3 billion in the first six months of 1997. Most of the restaurants are company owned. McDonalds will double the number of its restaurants in Brazil and add to the number of satellite locations, a spokesman said. The Brazilian customer base has increased by more than 70 percent, Fleischmann added.

Brazil is a top 10 market for them and clearly the emerging markets are a very important piece of their international profit targets going forward, Lehmans Speiser said. Brazil, in terms of an emerging market, is one of the biggest ones out there. So

Brazil, in particular, is an important market to obtain mid- to upper-teen profit growth in international operations, he said.

Most of the menu in Brazil is the typical McDonalds menu, though the restaurants do serve a Banana Pie, the spokesman said.

McDonalds stock rose 37.5 cents to $48.19 on the New York Stock Exchange.