RUSSIA – American multinational fast-food corporation has decided to temporarily close all its restaurants in Russia and pause all operations in the market following the country’s invasion of Ukraine.
McDonald’s move could have a major impact on the company’s revenue as Russia along with Ukraine accounts for 9% of its global revenues, or around US$2bn.
Globally, most McDonald’s (MCD) locations are operated by franchise operators. But that’s not the case in Russia, where 84% of locations are operated by the company, another big loss if the company pulls out indefinitely.
The company – which opened its first Russian branch in Pushkin Square in Moscow on 31 January 1990 – said it will continue to pay its 62,000 Russia-based employees.
Yum Brands Inc, the parent company of fried chicken chain KFC, has also announced a pause to its investment in Russia, a key market that helped the brand achieve record development last year.
Yum also said it was suspending operations of its 70 KFC company-owned restaurants in the country and finalizing an agreement to suspend all Pizza Hut restaurant operations in Russia, in partnership with its master franchisee.
Unlike McDonald’s, nearly all of its 1,000 KFC and 50 Pizza Hut locations are independent franchisees, meaning Yum does not have as much control as if it ran them itself but also has less exposure to financial and operational risks.
Starbucks, too, said it is suspending all business activity in Russia, including shipment of its products and cafes run by a licensee.
The company said that Kuwait-based Alshaya Group, which operates at least 100 Starbucks cafes, would still support its nearly 2,000 staff in Russia
Coca-Cola, PepsiCo halt operations
It seems that Russians will also have to make do without their favorite soda brands Coke and Pepsi following a decision by their owners to suspend sales in the federation.
In suspending sales of Pepsi-Cola, 7 Up and other brands in Russia PepsiCo cited “the horrific events occurring in Ukraine”.
The company has also halted capital investments and advertising in that country, where it’s operated for more than 60 years.
Echoing concern for the people of Ukraine voiced earlier by McDonald’s, Atlanta-based Coca-Cola said it was stopping its operations in Russia.
Along with soda, Russians will also not have a chance to enjoy their favorite European beer or spirit brands as three of the leading alcohol companies have also halted their operations in the country.
UK-based Diageo was the first to make the move in the alcoholic space, suspending all sales to the Russian Federation.
French spirits company Pernod Ricard and Danish brewer Carlsberg soon followed suit suspending exports of beer and other beverages to the country.
“Carlsberg Group has decided to immediately stop new investments into Russia as well as exports from other Carlsberg Group companies to Baltika Breweries in Russia,” Chief Executive Cees ‘t Hart said in a statement.
Dutch beer maker Heineken also said it will stop its exports to Russia because of the war in Ukraine.
Heineken which makes the beers Zhigulevskoe and Oxota for the local market in Russia also noted that all new investments in the country have also been halted.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE