Perhaps they got the idea from Mcdonald’s. The parade of businesses pulling out of Russia in protest of Vladimir Putin’s invasion of Ukraine saw another big name join the ranks this week. It looks like the Russian people will have to find a new source for their Cinnamon Roll Frappuccinos because Starbucks is exiting the market. Of course, it’s not as big of a blow as some other brands because Starbucks didn’t have all that many outlets in Russia and it only accounted for a tiny fraction of their total global business. But for many Russians who have fully embraced this slice of western society, they may be starting to get the message. (CNBC)
After 15 years operating in Russia, Starbucks will exit the market, joining companies like McDonald’s, Exxon Mobil and British American Tobacco in withdrawing from the country completely.
The coffee giant announced Monday that it will no longer have a brand presence in Russia. Starbucks has 130 locations in the country, which account for less than 1% of the company’s annual revenue. They are all licensed locations, so the Seattle-based company itself doesn’t operate them.
Starbucks said it will pay its nearly 2,000 Russian workers for six months and help them transition to new opportunities outside of the coffee chain.
So Starbucks had already been in the process of doing this but they have been working through the legal issues involved in cutting ties with franchisees. They stopped sending products to Russian outlets on March 8, leading to the “temporary” closure of some of the cafes. But now the ties are being cut completely. The 130 Russian franchises only accounted for 1% of the company’s business, but that’s still a significant chunk of revenue to give up. Plus, as noted in the excerpt above, they are giving all of their Russian workers six months of severance pay to help them transition to new jobs.
They’re taking a much smaller beating than Mcdonald’s, as I already suggested. The Golden Arches had nearly 900 outlets that were shuttered and that market accounted for 9% of their business after thirty years in operation there.
Vladimir Putin may claim that seeing these signs of American culture disappear from his country is a good thing, as he seeks to demonize the west. But what about his people? Many younger Russians have grown up in a culture that was considerably more liberal (if not libertine) than that experienced by previous generations. They’ve grown used to easy access to fast food and fancy coffee drinks, as well as denim blue jeans and other trappings of western life.
Will those consumers feel that sacrificing such ways of life are a patriotic price to pay for the sake of the motherland? Or are some of them growing resentful of the disruptions to their way of life and the economic damage coming from the global sanctions? Putin’s approval ratings with the public held up surprisingly well through the first few months of the invasion, primarily due to his control of state-run media. But by this point, the citizens have surely noted the rapidly rising death toll from the war as well as the disappearance of the businesses and jobs that many of them grew up taking for granted. How much longer can that situation hold?
I’m not sure how many other western businesses are still operating inside of Russia at this point. But there is definitely societal pressure on them to follow suit and pull out of Mad Vlad’s country. Is this a permanent change? Assuming that this war reaches some sort of conclusion, will all of these companies move back in and just politely pretend that none of this awfulness ever happened? That’s pretty hard to imagine in my opinion.
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