French trade their bistros for Big Macs in recession
Bloomberg News
November 3, 2008
Bloomberg News
It's lunchtime in Paris and this packed restaurant has neither checkered tablecloths nor carafes of red wine. It's a McDonald's and the French are lovin' it.
While rising prices and record-low consumer confidence drive the French to throw their culinary pride to the wind and embrace le Big Mac, traditional bistros are hurting. About 3,000 independent French restaurants filed for bankruptcy in the first half of the year, a record 27 percent increase from the same period a year earlier, according to Paris-based statistics office Insee.
Meanwhile, France has cemented its position as the biggest earner outside the U.S. for Oak Brook-based McDonald's Corp., accounting for about 13 percent of total sales.
"A hamburger patty and fries in a bistro around the corner from my office costs almost twice as much," said Alexandre Cavanel, 27, a computer programmer, as he tucked into his 8 euro ($10.70) double cheeseburger meal with colleagues at a McDonald's in Paris' opera district.
France may have slipped into its first recession in more than 15 years in the third quarter, Insee reported last month. Consumer spending will stagnate for the rest of 2008 as employment and the real estate market deteriorate and credit for new investments dries up, the statistics office said.
"Clearly, the current economic environment speaks in favor of cheaper products," said Dominique Barbet, an economist at BNP Paribas SA in Paris.
That trend is evident in other industries. Retailers including Carrefour SA and Casino Guichard-Perrachon SA report consumers buying unbranded products and switching from supermarkets to discount chains. Groupe Danone SA, the maker of Activia yogurt, last month introduced cheaper products to offer shoppers alternatives.
Many French restaurateurs and cafe owners are concerned that rising prices and growing unemployment, together with the global financial crisis, will stop people from dining out in one of the world's most pervasive restaurant cultures.
"Fewer people eat in restaurants now, and when they do come, they don't order like before," said Clara Vega, a manager of La Cote d'Azur cafe in central Paris. "They used to order an appetizer and a meat dish with a glass of wine for lunch. Now they buy a croque and wash it down with a carafe of tap water."
A croque is a popular French snack similar to a grilled cheese sandwich. A steak with fries costs around $18, while a croque goes for about $7 at La Cote d'Azur.
Falling consumer spending and a ban on smoking in cafes have eroded business, resulting in more restaurant bankruptcies, court records show.
"We are disturbed by the rise in bankruptcy filings and fear the consequences for our businesses," Union des Metiers et des Industries de l'Hotelerie, a hotel and restaurant association said. "Restaurants, particularly cafes in rural areas, have seen a brutal decline in their business."
McDonald's, which opened its first French restaurant in Strasbourg in 1979, is doing better than ever. Sales at the company's 1,115 outlets in France will rise this year to a record 3.35 billion euros, McDonald's said this month.
"In the short term, we will probably benefit from the current economic crisis," said Jean-Pierre Petit, chief executive of McDonald's France and southern Europe. "[But] it's never good to have an economic crisis because sooner or later it will catch up with you," he added.
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