McDonald’s, Coca-Cola, Starbucks and PepsiCo Join a Corporate Exodus From Russia

McDonald’s, Coca-Cola, PepsiCo, Starbucks, and General Electric, the pervasive global brands and hallmarks of U.S. corporate, all declared on Tuesday that they were temporarily putting their business operations on hold in Russia in light of the country’s invasion of Ukraine.

“Our ethos means something and we can’t ignore the unnecessary human suffering taking place in Ukraine,” Chris Kempczinski, McDonald’s President and CEO, said in an open letter to workers.

The Chicago-based burger mammoth said it would temporarily shut down 850 stores but would keep paying its 62,000 employees in Russia “who have poured their hearts and souls into the McDonald’s brand.”

“The current scenario is immensely challenging for a brand like ours, and there are numerous contemplations,” Kempczinski said in the letter. For instance, McDonald’s works with many Russian suppliers and serves millions of customers daily.

Recently, Starbucks announced that it was donating profits from its 130 Russian stores owned and operated by Kuwait-based Alshaya Group to humanitarian relief in Ukraine. But, the company took a different path and said it would temporarily shut down those stores. Alshaya Group will keep on paying Starbucks’ 2,000 Russian workers, Kevin Johnson, Starbucks’ President, and CEO said in an open letter to the workers.

“Through this unprecedented situation, we will carry on with making decisions that are aligned with our mission,” Johnson said.

Coca-Cola Co. reported that it would discontinue its business in Russia, even though the details weren’t ample. Coke’s associate, Switzerland-based Coca-Cola Hellenic Bottling Co., has 10 bottling facilities in Russia, which is its biggest market. Coca-Cola holds a 21% stake in Coca-Cola Hellenic Bottling Co.

General Electric and PepsiCo both reported partial closures of their Russian businesses.

Pepsi announced the suspension of sales of its beverages in Russia. It will also suspend any investments, promotions, and endorsements.

Yet, the organization said it will continue to support its 20,000 Russian workers and the 40,000 Russian farmers who are a part of its supply chain.

PepsiCo CEO Ramon Laguarta said in an email to its employees that, “We must stay true to the humanitarian element of our business like never before.”

In a Twitter post, General Electric said that it was partially closing its functions in Russia. GE said that the possible exceptions could be the fundamental medical apparatus and support for the current power services.

McDonald’s is one of those to endure the greatest financial hit. Unlike other fast-food chains like Pizza Hut, KFC, and Starbucks, whose Russian locations are owned by franchisees, McDonald’s owns 84% of the stores in Russia. McDonald’s has also shut down 108 of its stores in Ukraine but is continuing to pay its employees.

Lately, in a regulatory filing, McDonald’s said its restaurants in Ukraine and Russia are responsible for 9% of its yearly revenue, or nearly $2 billion last year.

The parent company of KFC and Pizza Hut, Yum Brands, said that it planned to temporarily close 70 company-owned KFC restaurants in Russia. The company also said it was in talks with a franchisee to close every one of the 50 Pizza Hut restaurants in Russia. It reported that it was donating all its profits from 1,050 restaurants in Russia to humanitarian relief.

Burger King said it is diverting the profits from its 800 Russian stores to contribute to relief efforts. It also announced the donation of food vouchers worth $2 million to the Ukrainian refugees.

McDonald’s reported that it has given over $5 million to its employee assistance reserve and to other relief efforts. It has also established a Ronald McDonald House Charities clinical unit at the Polish boundary with Ukraine; another mobile medical unit is planned to be set up in Latvia, the company said. PepsiCo said that it is donating food and $4 million to relief associations.

Various companies have a substantial history of working in Russia. In the mid-1960s, during the Cold War, PepsiCo entered the Russian market. It also contributed to the establishment of common ground between the Soviet Union and the United States.

Afterward, McDonald’s was one of the principal U.S. companies to open a store in Russia, an indication that the Cold War had defrosted. On Jan. 31, 1990, a huge number of Russians arrived early in the morning to try burgers at the very first McDonald’s restaurant in Moscow. By evening, 30,000 meals were sold, an opening-day record for the company.

But since the Ukraine invasion last month, numerous companies have discontinued operations in Russia. Among them is also the consumer goods giant, Unilever, which on Tuesday said it has terminated all imports and commodities of its goods into and out of Russia and that it won’t make any investments in the country. Amazon said that its cloud computing network, Amazon Web Services, will discontinue new sign-ups in Russia and Belarus.

Pressure had been increasing on corporations that stayed in the country. Hashtags to boycott Mcdonald’s, PepsiCo, and Coca-Cola immediately emerged via online media.

Last week, a key investor in McDonald’s, Thomas DiNapoli, sent letters to McDonald’s and nine different companies asking them to consider halting their operations in Russia.

“Corporations carrying on with their operations in Russia must consider whether it is worth the speculation. As your investors, we need validation that our holdings don’t deteriorate in value,” DiNapoli said on Tuesday. “I appreciate the organisations making the right decisions and pausing their operations in Russia.”