Starbucks pulls the plug on Russian operations 15 years after entry

RUSSIA – Starbucks, the world’s largest coffeehouse chain, is exiting the Russian market and will no longer have any brand presence in the country.

The decision will see the closure of 130 Starbucks branded stores that are owned and operated by Alshaya Group, a Kuwait-based franchise operator.

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The coffeehouse chain which is exiting Russia after 15 years has added that it will pay its nearly 2,000 Russian workers for six months and help them transition to new opportunities outside of the coffee chain.

Starbucks had suspended all business activity with the country since March 8 including shipments of all Starbucks products and temporarily shuttering cafes.

It however did not disclose the financial impact of the suspension of business operations in its latest quarterly results released in early May.

Unlike other Western multinationals, Starbucks does not expect a significant financial impact from the closure as the business in Russia accounted for less than 1% of the company’s annual revenue.

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Both consumers and investors have pressured Western companies to cut ties with Russia to show opposition to the invasion of Ukraine, making Starbuck join the likes of McDonald’s which exited last week after 32 years of operating in Russia.

McDonald’s sold its stores which are almost all owned by the company to a local franchisee and has initiated the process of “de-arching” those restaurants.

The de-arching entails the removal of the McDonald’s name, logo, branding, and menu from the restaurants though the company will continue to retain its trademarks in Russia.

The fast-food giant pointed out that the suspension of its sizable Russian and Ukrainian operations cost it US$127 million in its first quarter. The two markets accounted for 9% of its revenue in 2021.

The company had roughly 850 restaurants in Russia, most of which were operated by the company instead of licensees, and 108 restaurants in Ukraine.

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Meanwhile, Multinational soft beverage manufacturer, Coca-Cola Company has also announced the suspension of its business in Russia and will continue to monitor and assess the situation as circumstances evolve.

In a regulatory filing, Coke said its business in Ukraine and Russia contributed about 1% to 2% of its consolidated net operating revenue and operating income in 2021.

Many western multinational companies are exiting or curtailing their operations in response to business imperatives; the rush of sanctions imposed by Western governments which have made it impossible for foreign firms to conduct even basic business transactions in the country.

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