KANSAS CITY — Add PepsiCo, Inc., Coca-Cola Co., McDonald’s Corp., Starbucks Corp. and Yum! Brands, Inc. to the growing list of companies suspending some operations in Russia over that country’s invasion of Ukraine.
Ramon Laguarta, chief executive officer of PepsiCo, Inc., Purchase, NY, said in an email to employees on March 8 that the company would suspend the sale of beverages like Pepsi Cola, 7UP and Mirinda as well as capital investments and all advertising in Russia.
“As a food and beverage company, now more than ever we must stay true to the humanitarian aspect of our business,” Mr. Laguarta wrote. “That means we have a responsibility to continue to offer our other products in Russia, including daily essentials such as milk and other dairy offerings, baby formula and baby food. By continuing to operate, we will also continue to support the livelihoods of our 20,000 Russian associates and the 40,000 Russian agricultural workers in our supply chain as they face significant challenges and uncertainty ahead.”
Mr. Laguarta added that PepsiCo has suspended operations in Ukraine and is working to provide aid to Ukrainian refugees in neighboring countries through donations to aid agencies and the ramping up of production at other PepsiCo manufacturing plants in Europe.
The Coca-Cola Co., Atlanta, released a brief statement March 8 that it was “suspending its businesses” in Russia, but did not provide details.
McDonald’s temporarily will close all its restaurants in Russia and pause all operations in that market, according to an email sent March 8 by Chris Kempczinski, CEO, to employees and franchises.
On the same day, Kevin Johnson, president and CEO of Starbucks, wrote employees saying the company was suspending all business activity in Russia. The company has approximately 130 locations in the country.
“Our licensed partner has agreed to immediately pause store operations and will provide support to the nearly 2,000 partners in Russia who depend on Starbucks for their livelihood,” he wrote.
Russia’s invasion of Ukraine also drew a reaction from Yum! Brands. The owner of the KFC, Pizza Hut and Taco Bell brands suspended all investment and restaurant development in Russia.
In Russia, McDonald’s at the end of 2021 had 847 restaurants with 84% operated by the company. The chain had 108 in Ukraine, all operated by the company. The two countries accounted for 2% of McDonald’s systemwide sales in 2021.
“We understand the impact this will have on our Russian colleagues and partners, which is why we are prepared to support all three legs of the stool in Ukraine and Russia,” Mr. Kempczinski said of restaurants closing in Russia. “This includes salary continuation for all McDonald’s employees in Russia.”
Chicago-based McDonald’s also is paying full salaries to Ukrainian employees, has donated $5 million to an employee assistance fund and is supporting relief efforts by the International Red Cross.
“Across the rest of Europe, we will stay focused on how McDonald’s can best help those in need, both now and in the future,” Mr. Kempczinski said. “We have already seen extraordinary leadership by our Ukrainian and Russian teams, and I know the rest of the McDonald’s system stands ready to support the large number of refugees who have been displaced by this conflict.
“As we move forward, McDonald’s will continue to assess the situation and determine if any additional measures are required. At this juncture, it’s impossible to predict when we might be able to reopen our restaurants in Russia. We are experiencing disruptions to our supply chain along with other operational impacts. We will also closely monitor the humanitarian situation.”
Louisville, Ky.-based Yum! has about 1,000 KFC restaurants and 50 Pizza Hut locations in Russia. Independent operators run nearly all the restaurants under license or franchise agreements. Yum! is donating $1 million to the Red Cross, is activating a disaster relief fund to support Ukrainian franchise employees and is matching donations from employees to charities providing relief in Ukraine.
“McDonald’s and other fast-food outlets are under pressure to withdraw from the Russian market,” said Ramsey Baghdadi, a consumer analyst for GlobalData, March 8. “However, this is easier said than done for the fast-food industry. Russia represents approximately 0.7% of the global fast-food restaurant’s value in 2020. Such a small proportion of value generation in Russia tells us that fears of losing sales is not the main factor at play here.
“The challenge that foodservice providers have is the very nature of their business model. Fast-food chains such as McDonald’s and KFC often have complicated agreements with their outlets as a large proportion of them are franchises and are not enterprises. So, it becomes a much more challenging negotiation to completely stop operations compared to other industries.”
A GlobalData consumer survey released in March showed consumer concern for social causes, however.“As 72% of consumer purchases are driven by a brand’s ethics or support shown toward a social cause, it becomes difficult for these companies to balance consumer expectations and their operational needs, putting pressure on international fast-food restaurants,” Mr. Baghdadi said.