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Starbucks quits Russia as warmongering nation becomes ‘a commercial pariah’

(Source: Bigstock)

Starbucks is quitting Russia after 15 years there due to the country’s invasion of Ukraine and the human rights abuses of its military. 

With just 130 franchised stores there representing around 1 per cent of its global sales, the impact will not be great. However, its nearly 2000 workers there will all be paid for six months to help them transition to new employment opportunities. 

The company had shuttered all of its stores on March 8 and discontinued shipping supplies there. Franchisees will now be forced to find another brand to operate under.

In quitting the country, Starbucks follows McDonald’s, British American Tobacco, Exxon Mobil and a rafter of other multinational companies. 

Neil Saunders, MD at GlobalData, said the symbolism of Russia losing yet another global brand “speaks volumes about the hardening attitudes of some western consumer firms”.

“While the lack of a clear timeline back to trading normality in Russia played a role in Starbucks’ decision to pull out, the moral dimension was likely foremost of mind. Starbucks’ Russian operations are run under a licensing agreement by Alshaya Group. As such, Starbucks carries very little commercial risk and could have chosen to bide its time. However, Starbucks does not want its brand associated with Russia, so has opted for a more permanent settlement.”

After McDonald’s and Starbucks announced their cessation of operations in Russia, Saunders expects more consumer companies to come under pressure from customers outside Russia.  

“Some will follow, but other consumer packaged goods and retail firms will likely hold out as, unlike Starbucks and McDonald’s, they have extensive exposure to, and interests in, Russia. This includes luxury brands which, before the invasion of Ukraine, made good money from the lucrative market for high-end goods.

“Even so, it is likely that Russia will become more of a commercial pariah as companies turn their backs on a country that represents things they do not wish to be associated with.”

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