#173 A not so Happy Meal for McDonald’s

In 2009, Hjörtur Smárason walked into a McDonald’s restaurant in Iceland and ordered what turned out to be the last hamburger and fries ever served in the country. The global fast food giant that maintains almost 40,000 restaurants in more than 100 countries had failed and decided to leave the island state in the middle of the North Atlantic, making Iceland join ranks with the likes of North Korea, Iran, Afghanistan, or most of Africa.

Often, failure in international markets is associated with global corporations not understanding local consumer preferences or not respecting business practices. None of these applied to McDonald’s challenges in Iceland. While Iceland’s market potential was always limited because of its small size of roughly 300,000 population, income in Iceland as always high, people ate out frequently and definitely had an affinity for Western, particularly American culture. McDonald’s decision to enter the market as early as 1993, therefore seemed to make perfect sense. Early on, the first challenge presented itself in the form of local competition. Dating back to 1937, the hot dog stand Bæjarins Beztu Pylsur is somewhat of a national icon and a local burger chain, Hambórgarabúllan, was so popular that the appeal of the Golden Arches wasn’t quite as pronounced as one would have expected. Then, there were also logistical challenges. For a company that is built – among many factors – around an efficient supply chain, cheap ingredients and consistent quality, the distances of almost 3,000 miles from New York and about 1,200 miles from London were difficult to overcome. For instance, McDonald’s meat was originally sourced from local Icelandic farms, but a meat shortage made it necessary to start sourcing most ingredients from Germany. The final blow came in the form of the financial crisis of 2008/2009, when the Icelandic Krona lost more than half of its value. With the value of the Krona being so low, and customs tariffs being so high, McDonald’s had to substantially raise prices for its menu items. At one point, Iceland actually had the highest-priced Big Mac in the whole world at $6.36. Ultimately, operating in Iceland no longer made business sense, and so McDonald’s left Iceland in 2009.

Until 2012, the last-ever Icelandic McDonald’s burger and fries was on display at a hostel in Reykjavik’s major bus terminal. They were then donated to the National Museum of Iceland where, to this day, visitors can pay their respects in person or via a live cam. You may be amazed (or not) to hear that to this day, the meal still looks happy – with very few signs of decay. Except for the fries that people have been stealing to get a taste of the past…

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