fast food industry
After calls for a boycott: McDonald’s, Starbucks and Coca-Cola stop doing business in Russia
McDonald’s branch in St. Petersburg
© Maksim Konstantinov/ / Picture Alliance
Despite the war and Western sanctions, US fast food giants such as McDonald’s and Starbucks have kept their Russian branches open – and have received massive criticism for doing so. Now the corporations are pulling the ripcord.
Since the beginning of the Russian invasion of Ukraine, new large corporations have announced almost every day that they will stop doing business with Russia. Ikea has closed its furniture stores, H&M and Zara have shuttered their stores, Visa and Mastercard are stopping their services. Large automakers are also putting their Russian business on hold, tech companies like Apple and Netflix are pulling out – even the Western oil industry is selling off its billion-dollar stakes in the Russian energy market.
But one industry has so far seemed unimpressed by the war: the US fast food companies, of all people, continued to do business in Putin’s empire and left their many hundreds of shops open. If you wanted to eat a Big Mac in Moscow or sip a Starbucks coffee in Saint Petersburg, you could still do so.
Now some of the biggest fast food giants are also pulling the ripcord. After massive public pressure and calls for a boycott on social media, McDonald’s, Starbucks and Coca-Cola have announced that they will shut down their operations in Russia. Pepsi is also stopping the sale of soft drinks, but the group wants to continue offering everyday items such as milk and baby food for “humanitarian reasons”.
The fast-food companies had faced increasing public opposition in the past few days: using the hashtags #BoycottMcDonalds or #BoycottCocaCola and #BoycottPepsi, social media users denounced the companies’ silence on the war in Russia and called for a boycott of the products.
Investors such as the New York Pension Fund, which is the third-largest pension fund in the United States and has assets in the billions, have urged McDonald’s and Pepsi to halt activities in Russia. Chains like Burger King, KFC and Starbucks also came under significant pressure because of their business in Russia.
McDonald’s is closing 847 restaurants
McDonald’s opened its first branch in Moscow during the Soviet Union. The fast food giant is now closing all 847 burger restaurants in the country until further notice. What hits McDonald’s particularly hard: The group does not operate 84 percent of Russian restaurants using the franchise model that is customary in the industry, but rather on its own. On the one hand, this means that McDonald’s has it largely in its own hands to stop sales in Russia. On the other hand, the financial losses also lie directly with the group itself.
A statement from the group to investors said that the 955 restaurants in Russia and Ukraine account for only 2 percent of global group sales, but for 9 percent of revenue. Because most of the shops are operated by the company itself, more of what customers pay at the checkout is left with the group itself. Ironically, the Russian restaurants are particularly lucrative for McDonald’s.
But keeping the shops open was also becoming increasingly expensive for McDonald’s. In his fire letter, Thomas di Napoli of the New York Pension Fund sees “significant and growing legal, compliance, operational, human rights and human resources and reputational risks.” McDonald’s has lost more than 10 percent of its value on the stock exchange in recent weeks.
Franchise business under pressure too
The world’s largest coffee chain, Starbucks, is also closing all stores in Russia. Starbucks recently operated around 130 branches, all of them in the franchise model. Starbucks CEO Kevin Johnson condemned Russia’s attack on Ukraine in a statement on Friday as “unreasonable, unlawful and horrific attacks.” The shops initially remained open. The license partner has now agreed to immediately pause business activities, Johnson said in an update. The Russian Starbucks stores are operated by a franchise conglomerate from Kuwait.
Other major fast food chains are also now under pressure to reconsider their local franchisee deals. The fast-food group Yum Brands, for example, operates its more than 1,000 Russian KFC chain stores and 50 Pizza Hut restaurants primarily as franchises. The company said it is closing all of its KFC restaurants and is working on an agreement with its Pizza Hut franchise partner to cease operations. “This action builds on our decision to suspend all investment and restaurant development in Russia and to redirect all profits from operations in Russia to humanitarian efforts,” the company said in a statement.
Note: The article first appeared on March 8th and was completely revised after McDonald’s and Co. announced their withdrawal.
Sources: DPA / CNN / Reuters / NYTimes / CNBC / BBC / McDonald’s (Russia store) / McDonald’s (Notice) / Coke / Pepsi / Starbucks