Breaking: Starbucks Announces Exit from Russian Market

Starbucks Announces Exit from the Russian Market

According to combined media reports, on the 23rd local time, the American coffee company Starbucks announced its withdrawal from the Russian market. In an open letter to employees the same day, Starbucks said it would close all 130 stores in Russia and that its brand would no longer remain in the market. The company also said it would pay six months' wages to its nearly 2,000 Russian employees and help them transition to new positions.

Starbucks entered the Russian market in 2007 with 130 stores, all fully owned and operated by a franchise partner. Foreign market analysts estimate that the Russian market accounts for less than 1% of the company's annual revenue.

Earlier Response to the Ukraine-Russia Conflict

In March of that year, as the war between Russia and Ukraine continued, then-Starbucks CEO Kevin Johnson said in an open letter dated March 4 that Starbucks condemned Russia's invasion of Ukraine and expressed sympathy for all those affected, while committing to donate royalties from its Russian business operations to humanitarian causes in the country. On March 8, the company issued a statement about suspending business and store operations in Russia.

In its second-quarter financial report released on May 3 local time in the United States, Starbucks did not disclose the financial impact of suspending Russian operations on the company.

McDonald's Also Exits the Russian Market

Before Starbucks announced its withdrawal, the American McDonald's Corporation issued an announcement on May 16 local time confirming its exit from the Russian market. On May 19, McDonald's agreed to sell its Russian business to Alexander Govor, who had long held McDonald's franchise rights. He said that in the future more than 90% of the network suppliers for the "McDonald's" company would come from Russia, and that the chain restaurants, menus, and workplaces would be preserved, but would continue operating under a new brand name.

Similarly, in March of that year, McDonald's CEO Chris Kempczinski said in an open letter to employees dated March 8 that the conflict in Ukraine and the humanitarian crisis in Europe had brought indescribable suffering to innocent people, and that as a system McDonald's stood with the world in condemning aggression and violence and praying for peace. The letter also stated that the company would continue to pay wages to McDonald's 62,000 employees in Russia and had donated 5 million dollars to an employee assistance fund.

A Broader Corporate Withdrawal

Beyond these two major American restaurant chains announcing their withdrawal one after another, many Western companies have also agreed to sell their assets in Russia.

Russian Response and Market Analysis

Dmitry Medvedev, head of the Russian Security Council, said in March, when foreign companies were withdrawing from the Russian market en masse, that the government was taking actions such as bankruptcy or nationalization of departing foreign companies' assets. Some Russian market analysts believe that as these international brands announce their withdrawal, most will be taken over by Russian domestic enterprises, which from another perspective presents a once-in-a-lifetime opportunity for the development of local businesses.

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