Large multinationals suspend certain operations in Russia
KANSAS CITY — Add PepsiCo, Inc., Coca-Cola Co., McDonald’s Corp., Starbucks Corp. and Yum! Brands, Inc. to the growing list of companies suspending certain operations in Russia following that country’s invasion of Ukraine.
Ramon Laguarta, chief executive of PepsiCo, Inc., Purchase, NY, said in an email to employees March 8 that the company would suspend the sale of beverages like Pepsi Cola, 7UP and Mirinda as well as capital investments and any advertisement in Russia.
“As an agribusiness, we must stay true to the humanitarian aspect of our business more than ever,” Laguarta wrote. “This means that we have a responsibility to continue to offer our other products in Russia, including basic necessities such as milk and other dairy products, infant formula and baby food. By continuing to operate , we will also continue to support the livelihoods of our 20,000 Russian associates and 40,000 Russian agricultural workers in our supply chain, as they face significant challenges and the uncertainty ahead.
Laguarta added that PepsiCo has suspended operations in Ukraine and is working to provide aid to Ukrainian refugees in neighboring countries through donations to aid agencies and increased production in other PepsiCo manufacturing plants in Europe.
The Coca-Cola Co., Atlanta, issued a brief statement March 8 saying it was “suspending operations” in Russia, but did not provide details.
McDonald’s will temporarily close all of its restaurants in Russia and suspend all operations in that market, according to a March 8 email from CEO Chris Kempczinski to employees and franchisees.
That same day, Kevin Johnson, president and CEO of Starbucks, wrote to employees saying the company was suspending all business activity in Russia. The company has about 130 locations in the country.
“Our authorized partner has agreed to immediately suspend store operations and will provide support to the nearly 2,000 partners in Russia who depend on Starbucks for their livelihoods,” he wrote.
Russia’s invasion of Ukraine also drew a reaction from Yum! Marks. The owner of the KFC, Pizza Hut and Taco Bell brands has suspended all investment and restaurant development in Russia.
In Russia, McDonald’s had 847 restaurants at the end of 2021, 84% of which were operated by the company. The chain had 108 in Ukraine, all operated by the company. The two countries accounted for 2% of McDonald’s systemwide sales in 2021.
“We understand the impact this will have on our Russian colleagues and partners, which is why we are ready to support the three legs of the stool in Ukraine and Russia,” Kempczinksi said of the restaurant closures in Russia. “This includes maintaining pay for all McDonald’s employees in Russia.”
Chicago-based McDonald’s is also paying full salaries to Ukrainian employees, donating $5 million to an employee relief fund and supporting International Red Cross relief efforts.
“In the rest of Europe, we will remain focused on how McDonald’s can best help those in need, now and in the future,” Mr Kempczinski said. “We have already seen extraordinary leadership from our Ukrainian and Russian teams, and I know the rest of the McDonald’s system stands ready to support the large number of refugees who have been displaced by this conflict.
“As we move forward, McDonald’s will continue to assess the situation and determine if further action is needed. At this stage, it is impossible to predict when we will be able to reopen our restaurants in Russia. We are experiencing disruptions in our supply chain as well as other operational impacts. We will also closely monitor the humanitarian situation.
Yum! has approximately 1,000 KFC restaurants and 50 Pizza Hut locations in Russia. Independent operators operate almost all restaurants under license or franchise agreements. Yum! donates $1 million to the Red Cross, activates a disaster relief fund to support employees of Ukrainian franchises, and matches employee donations to charities providing relief in Ukraine.
“McDonald’s and other fast food outlets are under pressure to pull out of the Russian market,” Ramsey Baghdadi, consumer analyst for GlobalData, said March 8. “However, this is easier said than done for the fast food industry. Russia accounts for around 0.7% of global fast food value in 2020. Such a small proportion of the creation of value in Russia tells us that the fear of losing sales is not the main factor at play here.
“The challenge faced by food service providers is the very nature of their business model. Fast food chains such as McDonald’s and KFC often have complicated agreements with their outlets because a large portion of them are franchises and not corporations. It therefore becomes a much more difficult negotiation to completely halt operations compared to other industries.
A GlobalData consumer survey released in March, however, showed that consumers were concerned about social causes.
“As 72% of consumer purchases are driven by ethics or a brand’s support of a social cause, it becomes difficult for these companies to balance consumer expectations and operational needs, putting pressure on international fast food restaurants,” Baghdadi said. .