McDonald’s, Starbucks, Coke and Pepsi halt business in Russia

WHAT YOU NEED TO KNOW:

• McDonald’s, Coca-Cola, PepsiCo, and Starbucks all said Tuesday they are suspending business in Russia after it started its invasion of Ukraine.
• All four iconic U.S. brands have major operations in Russia.
• McDonald’s said it closed 850 restaurants but would go on paying its 62,000 employees.

McDonald’s, Coca-Cola, PepsiCo, and Starbucks all said Tuesday they are suspending business in Russia. A symbolic move by four iconic U.S. brands. in opposition to Russia’s invasion of Ukraine,

Pepsi has been selling its products in Russia for over sixty years. McDonald’s opened its first location in the Soviet Union just months before the superpower collapsed in 1991.

Pepsi, Coke, McDonald’s and Starbucks received criticism for continuing to do business in Russia while other U.S. companies announced suspensions and paused sales.

Yale Professor Jeffrey Sonnenfeld published a list of U.S. companies that have withdrawn from Russia following the invasion. Until Tuesday afternoon, Coke was among the most recognizable names on the spreadsheet.

Russia represents one of the few regions worldwide where Coke’s rival PepsiCo has a larger presence.

PepsiCo suspends sales of its drinks — Pepsi-Cola, 7UP and Mirinda brands — in Russia but said it will keep selling some essential products, like baby formula, milk and baby food.

The Wall Street Journal reported earlier on Tuesday that Pepsi was weighing different options for its Russian business, including writing off its value. Economic sanctions have greatly complicated the process of offloading Russian assets.

Since the Russian invasion of Crimea in 2014, many U.S. companies have looked to reduce their exposure in both Russia and Ukraine. Some restaurant chains, like McDonald’s, have sold off some of their company-owned locations to local franchisees.

McDonald’s announced Tuesday all 850 of its Russian restaurants would temporarily close. Until then, the fast-food chain had stayed silent on the war, drawing stronger criticism than the handful of restaurant companies that condemned the invasion but kept their locations open.

About 84% of McDonald’s Russian locations are owned by the company, while the rest are operated by franchisees. Owning more of its restaurants means greater revenue for the company, but greater risk in times of turmoil or economic downturn.

Starbucks went a step further than McDonald’s, saying it would suspend all Russian business activity, including the shipment of its products.

Of the two restaurant companies, McDonald’s has a larger presence in the country and receives a higher percentage of its global revenue from those sales.

Source: CNBC