The Seattle based chain Starbucks leaves the Russian market after 15 years of operating in the country. Starbucks joins McDonald’s, ExxonMobil, and Netflix to remove itself from Russia after its invasion of Ukraine.
According to CNBC, Starbucks has around 130 shops in Russia which is less than 1 percent of its annual revenue. The coffee shop has closed its chains in all locations and announced that it has ‘made the decision to exit and no longer have a brand presence in the market.’
The Western governments have imposed a rush of sanctions, making it impossible to conduct even basic business transactions for foreign firms. They have mentioned the growing humanitarian crisis in Ukraine. According to the data released, more than 6 million refugees have been registered by the UN refugee agency.
At the beginning of March, Starbucks’ chief executive Kevin Johnson commented that the ‘unprovoked, unjust and horrific attacks on Ukraine by Russia and that our hearts go out to those affected.’
Comparatively, very few US companies want to remain in the Russian market, but many of the companies have found that leaving the country is easier said than done. Companies like Google have been limited by the 2021 law that requires them to keep some employees in the country. Starbucks has said that it will pay 2,000 of its Russian employees for six months and will help them find new jobs outside the company.
Alternatively, food companies are facing some difficulties withdrawing themselves from the country. Most of the franchisees like KFC and Pizza Hut have a limit to controlling local operations, like KFC and Pizza.
McDonald’s has announced that it would exit the country, citing the ‘untenable’ business climate after more than 30 years of investment. The company announced that Siberian franchisee Alexander Govor would take over 850 stores and would operate under a new brand and retain McDonald’s employees for at least two years. Food producers such as PepsiCo, Nestle and Mondelez are cutting off sales of items such as sodas, snacks and candy but are continuing the goods of dairy products and baby formula.
The pause of Starbucks included shipments of all Starbucks products and temporarily shuttering cafes. In the latest results, the company did not disclose the financial impact of the suspension of the company.
Starbucks’ financial blow is not as large as McDonald’s, who has been in Russia for more than 30years now. The suspension cost them $127 million in the first quarter. The Russian and Ukrainian market accounted for 9% of their revenue in 2021. There were roughly 850 restaurants in Russia.
Starbucks entered Russia in 2007 and had 130 coffee shops owned and operated by a license.
