Which companies are pulling out of Russia?

Thirty years ago when communism collapsed in the Soviet Union, Western firms stepped up their presence in Russia.

The arrival of big Western companies symbolised the start of a new era with Russians becoming eager consumers of brands ranging from fast-food chain McDonalds to Levi jeans and luxury goods.

Now, in the wake of President Putin’s invasion of Ukraine, a growing number of firms have suspended activities in Russia.

So which firms, in which sectors, are exiting and why have others held back?

Fast food and drinks giants

McDonald’s, Coca-Cola, Starbucks and Heineken are the latest companies to announce they are halting business in Russia after mounting pressure to act.

McDonald’s said it was temporarily closing its roughly 850 restaurants in Russia, while Starbucks also said its 100 coffee shops would shut.

The firms initially remained tight lipped over the conflict, but took action because shareholders “wouldn’t stand” for the continued generation of profits from Russia, says Anna MacDonald, a fund manager at Amati Global Investors.

“It was affecting their share prices and the feeling was that it was just utterly inappropriate to continue to do so,” she told the BBC.

Pepsi, which has a much larger presence in Russia than rival Coca-Cola, said it was halting the production and sale of Pepsi and other global brands in Russia, but the company, which employs 20,000 people there, said it would continue to offer other products.

Food companies Nestle, Mondelez, Procter & Gamble and Unilever have halted investment in Russia, but said they would continue providing essentials.

Retail

The world’s biggest cosmetics firm L’Oreal and rival Estee Lauder are both closing shops and ceasing online sales. Estee Lauder, whose brands include Michael Kors, DKNY, Clinique and Bobbi Brown, has had a presence in the country for about 30 years and Russia was where it had some of its strongest sales.

In fact, Russia was the fifth largest European retail market globally last year, valued at £337.2bn. So some brands may not want to burn their bridges, if there’s a chance of returning at a later date.

That is why many firms, including other luxury retailers like Burberry and Chanel, simply say they are “suspending” sales and temporarily shutting stores rather than withdrawing altogether, says Chris Weafer, chief executive of consulting firm Macro-advisory Limited.

With sanctions limiting forms of payment and huge uncertainty over future prices and consumer appetite, the business climate is “extremely challenging” he adds, making the decision to hit pause easier.

The world’s biggest fashion retailers H&M and Zara-owner Inditex, which has 502 stores in the country, for example have already suspended sales in Russia, citing “tragic developments” in Ukraine. Other brands like Nike have simply said they can’t currently guarantee delivery of goods to customers in Russia.

More brands are likely to follow suit, according to Maureen Hinton of retail consultancy GlobalData. Boohoo, Swedish furniture giant Ikea and Japanese clothing retailer Uniqlo which initially kept its 49 shops Russian stores open, saying clothes were a “necessity of life”, are some of the other names to have now cut ties.

Source: BBC