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McDonald’s, Coca-Cola, Pepsi, Starbucks bow to pressure and shutter most operations in Russia

“Our values mean we cannot ignore the needless human suffering unfolding in Ukraine,” fast-food giant McDonald’s said.
Image: McDonald's restaurant in Moscow
A man walks by a McDonald's restaurant in Moscow, Russia on March 23, 2020.Sergei Fadeichev / TASS via Getty Images file
/ Source: NBC News

McDonald’s announced Tuesday it would temporarily close its more than 800 eateries in Russia, and condemned Moscow’s bloody invasion of Ukraine.

Within hours, PepsiCo and Coca-Cola announced they too are “suspending its business in Russia.” Starbucks president and CEO Kevin Johnson also announced Tuesday the suspension of business activities in Russia.

“Our hearts are with the people who are enduring unconscionable effects from these tragic events in Ukraine,” Coca-Cola said in a statement. “We will continue to monitor and assess the situation as circumstances evolve.

PepsiCo said it will keep selling products like milk, baby formula, and food but is shutting down its advertising and promotional operation in Russia for now, and suspending sales of its best-known drinks like Pepsi-Cola and 7-Up.

“As a food and beverage company, now more than ever we must stay true to the humanitarian aspect of our business,” PepsiCo CEO Ramon Laguarta wrote in a memo to employees.

The corporate moves by these iconic American brands came as the fast-food giants faced increasing pressure to get off the fence, and after a spate of other well-known U.S. companies announced they were halting their business dealings in Russia.

Starbucks’ Johnson said his company’s move also meant that shipment of all Starbucks products to Russia was suspended. He said that while stores would close, employees in Russia would be supported.

McDonald’s also said it was closing Ukrainian restaurants while “continuing to pay full salaries for our Ukrainian employees,” many of whom have sought sanctuary from the fighting in nearby Poland.

“In Poland and many other markets across Europe, our System has literally opened their homes, their hearts, and their restaurants” to those who have fled, the company said in its statement.

“The conflict in Ukraine and the humanitarian crisis in Europe has caused unspeakable suffering to innocent people,” it said. “We join the world in condemning aggression and violence and praying for peace.”

McDonald’s said it would keep paying the salaries of its Russian workers, as well.

“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,” it said. “This includes salary continuation for all McDonald’s employees in Russia.”

McDonald’s said it has 62,000 employees in Russia.

“In the thirty-plus years that McDonald’s has operated in Russia, we’ve become an essential part of the 850 communities in which we operate,” it said. “At the same time, our values mean we cannot ignore the needless human suffering unfolding in Ukraine.”

McDonald’s opened its first fast-food restaurant in the then-Soviet Union some 32 years ago, and now has 847 eateries in Russia and 108 in Ukraine.

Those restaurants account for 2% of McDonald’s sales, about 9% of its revenue, and 3% of its operating income, according to the company.

But experts said the fast-food chain’s reluctance to shutter its restaurants after the invasion stems from the fact that just 16% of its Russian locations are franchises owned and operated by local Russians, and all of the restaurants in Ukraine are run directly by the company.

“In 2014, after Russia was hit with sanctions in response to its Crimea invasion, there was a perceived negative reaction at the country level against American companies, including McDonald’s whose Moscow restaurants it closed for ‘sanitary violations,’” Bank of America securities analyst Sara Senatore wrote in a note to clients Monday that was obtained by CNBC.

Coca-Cola made its Russian debut in 1979 and opened its first bottling plant two decades later in Moscow, according to the company. It now has 10 such plants in Russia that employ thousands of people.

PepsiCo, which has an even bigger footprint in Russia, has already donated millions of dollars for Ukrainian refugee relief. The company said it also has a responsibility to its Russian workforce and customers.

“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,” LaGuarta wrote.

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