McDonald's, Starbucks, Coke, Pepsi join exodus out of Russia

McDonald’s, Starbucks, Coca-Cola, PepsiCo and General Electric all announced Tuesday they were suspending their business in Russia in response to the country’s invasion of Ukraine

Russia-Ukraine-War-McDonald's
Russia-Ukraine-War-McDonald's

McDonald's, Starbucks, Coca-Cola, PepsiCo and General Electric __ ubiquitous global brands and symbols of U.S. corporate might __ all announced Tuesday they were temporarily suspending their business in Russia in response to the country's invasion of Ukraine.

“Our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” McDonald's President and CEO Chris Kempczinski said in an open letter to employees.

The Chicago-based burger giant said it will temporarily close 850 stores but continue paying its 62,000 employees in Russia “who have poured their heart and soul into our McDonald’s brand.”

Kempczinski said it's impossible to know when the company will be able to reopen its stores.

“The situation is extraordinarily challenging for a global brand like ours, and there are many considerations,” Kempczinski wrote in the letter. McDonald's works with hundreds of Russian suppliers, for example, and serves millions of customers each day.

Last Friday, Starbucks had said that it was donating profits from its 130 Russian stores __ owned and operated by Kuwait-based franchisee Alshaya Group __ to humanitarian relief efforts in Ukraine. But on Tuesday, the company changed course and said it would temporarily close those stores. Alshaya Group will continue to pay Starbucks' 2,000 Russian employees, Starbucks President and CEO Kevin Johnson said in an open letter to employees.

“Through this dynamic situation, we will continue to make decisions that are true to our mission and values and communicate with transparency," Johnson wrote.

Coca-Cola Co. announced it was suspending its business in Russia, but it offered few details. Coke's partner, Switzerland-based Coca-Cola Hellenic Bottling Co., owns 10 bottling plants in Russia, which is its largest market. Coke has a 21% stake in Coca-Cola Hellenic Bottling Co.

PepsiCo and General Electric both announced partial shutdowns of their Russian business.

Pepsi, based in Purchase, New York, said it will suspend sales of beverages in Russia. It will also suspend any capital investments and promotional activities.

But the company said it will continue to produce milk, baby formula and baby food, in part to continue supporting its 20,000 Russian employees and the 40,000 Russian agricultural workers who are part of its supply chain.

“Now more than ever we must stay true to the humanitarian aspect of our business,” PepsiCo CEO Ramon Laguarta said in an email to employees.

General Electric also said in a Twitter post that it was partially suspending its operations in Russia. GE said two exceptions would be essential medical equipment and support for existing power services in Russia.

McDonald's is among those to take the biggest financial hit. Unlike Starbucks and other fast food companies like KFC and Pizza Hut, whose Russian locations are owned by franchisees, McDonald's owns 84% of its Russian stores. McDonald’s has also temporarily closed 108 restaurants it owns in Ukraine and continues to pay those employees.

In a recent regulatory filing, McDonald's said its restaurants in Russia and Ukraine contribute 9% of its annual revenue, or around $2 billion last year.

Yum Brands, the parent company of KFC and Pizza Hut, said Monday that it is donating all of the profits from its 1,050 restaurants in Russia to humanitarian efforts. It has also suspended new restaurant development in the country. Burger King said it is redirecting the profits from its 800 Russian stores to relief efforts and donating $2 million in food vouchers to Ukrainian refugees.

McDonald's said Tuesday it has donated more than $5 million to its employee assistance fund and to relief efforts. It has also parked a Ronald McDonald House Charities mobile medical care unit at the Polish border with Ukraine; another mobile care unit is en route to the border in Latvia, the company said. PepsiCo said it is donating food, refrigerators and $4 million to relief organizations.

Some of the companies have a long history operating in Russia. PepsiCo entered the Russian market in the early 1960s, at the height of the Cold War, and helped to create common ground between the U.S. and the Soviet Union.

Later, McDonald's was one of the first U.S. fast food companies to open a store in Russia, a sign that the Cold War had thawed. On Jan. 31, 1990, thousands of Russians lined up before dawn to try hamburgers __ many for the first time__ at the first McDonald's in Moscow. By the end of the day, 30,000 meals had been rung up on 27 cash registers, an opening-day record for the company.

But since the Ukraine invasion last month, many corporations have ceased operations in Russia in protest. Among them is consumer goods conglomerate Unilever, which on Tuesday said it has suspended all imports and exports of its products into and out of Russia, and that it will not invest any further capital into the country. In a more limited move, Amazon said Tuesday the company’s cloud computing network, Amazon Web Services, will stop allowing new sign-ups in Russia and Belarus.

Pressure had been mounting on companies that remained in the country. Hashtags to boycott companies like McDonald’s, Coca-Cola and PepsiCo quickly emerged on social media.

Last week, New York State Comptroller Thomas DiNapoli __ a trustee of the state's pension fund, which is a McDonald's investor __ sent letters to McDonald's, PepsiCo and eight other companies urging them to consider pausing their operations in Russia.

“Companies doing business in Russia need to seriously consider whether it’s worth the risk. As investors, we want assurances that our holdings are not in harms way," DiNapoli said Tuesday in a statement. "I commend the companies that are taking the right steps and suspending their operations in Russia.”

In his letter, Kempczinski cited influential former McDonald’s Chairman and CEO Fred Turner, whose mantra was, “Do the right thing.”

“There are countless examples over the years of McDonald’s Corp. living up to Fred’s simple ideal. Today is one of those days,” Kempczinski said.

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