Top U.S. brands which have been the face of America’s capitalism, such as Coca-Cola, McDonald’s, and Starbucks, have halted business operations in Russia temporarily after backlash intensified over the country’s invasion of Ukraine.
As per Bloomberg News, these MNCs made this decision in a series of announcements on Tuesday, joining hundreds of other global companies who have stopped work in Russia since the war began two weeks ago.
PepsiCo Inc. said it was suspending its soft drinks sales but will continue to sell baby and milk food products in Russia.
As the death toll rises and millions of refugees flee, intense criticism on social media has forced companies with large and well-entrenched business operations to relent. The move will further isolate Russia, the 11th largest economy globally with a 144 million population.
Gene Grabowski, a partner in KGlobal, a communication firm, said it becomes easier for other companies to follow suit if they have an interconnected supply chain. For example, Coca-Cola is a supplier to McDonald’s.
Some other major companies who have announced scaling back operations in Russia are –
- Yum! Brands pulled down its shutters at KFC outlets it owns in Russia and also is in the process of suspending Pizza hut operations. The MNC had said earlier that it would pause Restaurant business in Russia and channel all profits into humanitarian aid.
- PayPal Holdings Inc. said it was suspending its services in Russia and cannot estimate the potential financial impact of this situation.
- Amazon Inc. has stopped its cloud computing unit in Russia and Belarus and said that its Amazon Web services have no offices or data centers. They have a long-standing policy of not doing any business with the Russian Government.
- The Swiss luxury watch brand Rolex joins Richemont and Swatch to halt exports to Russia.
- L’Oréal has closed down its e-commerce brand sites and own-brand stores across Russia apart from its POS outlets in Departmental stores.
If things change, some companies have left their doors open for a possible resumption of operations in Russia. Starbucks and Mcdonald’s continue to pay salaries to workers after closing their outlets in the country. The profitability of these companies can be affected if the current situation prolongs.
According to Andrew Charles, an analyst with Cowen Inc., McDonald’s exposure to Ukraine and Russia is not a consequence even though they account for 9% of its revenue. The reason is that both accounts for only 3% of operating profit or $311 million out of the $10.4 billion operating profit reported last year.
Tuesday’s departure follows an earlier announcement made by companies including Apple Inc. and Nike Inc. Many consumer goods companies are waiting till the end; the reason is that they have spent decades building their iconic brands post the Soviet Union era.
