Breaking: Starbucks Announces Exit from Russian Market

Starbucks Announces Exit from Russian Market

According to comprehensive media reports, on the 23rd local time, American Starbucks Corporation announced its withdrawal from the Russian market. In an open letter to employees on the same day, Starbucks stated its decision to close all 130 stores in Russia, and that its brand would no longer remain in the Russian market. However, Starbucks announced 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 franchise partners. Foreign market analysts estimate that the Russian market business accounts for less than 1% of the company's annual revenue.

Response to Ukraine-Russia Conflict

In March this year, as the war between Russia and Ukraine continued, former Starbucks CEO Kevin Johnson stated in an open letter on March 4th: "Starbucks condemns Russia's unprovoked, unjust, and horrific invasion of Ukraine and expresses sympathy for all affected people, while also committing to donate royalties from its Russian business operations to humanitarian causes in the besieged country." On March 8th, a statement was issued regarding the suspension of business and store operations in Russia.

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

McDonald's Also Exits Russian Market

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

Similarly in March this year, American McDonald's CEO Chris Kempczinski stated in an open letter to employees on March 8th: "The conflict in Ukraine and the humanitarian crisis in Europe have brought indescribable suffering to innocent people. As a system, we (McDonald's) condemn aggression and violence together with the world and pray for peace." The open letter also stated that the company would continue to pay wages to McDonald's 62,000 employees in Russia and donated $5 million to an employee assistance fund.

Broader Corporate Withdrawal

In addition to the two major American restaurant chains successively announcing their withdrawal from the Russian market, many Western companies are also agreeing to sell their assets in Russia.

Russian Response and Market Analysis

Dmitry Medvedev, head of the Russian Security Council, stated in March when foreign companies were massively stopping/withdrawing from the Russian market that the government was taking actions such as bankruptcy/nationalization of departing foreign companies' assets. Some Russian market analysts believe that as these international brands announce their withdrawal from the Russian market, 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.

Image Source: Internet

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