Doing business with Russia: For major international brands, it’s not always black or white

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In the first month of Western sanctions on Russia, thousands of companies ceased operations in the country, either as a direct result or because the public – their customers – had little desire to see them gaining traction. money as Russian troops continued the invasion of Ukraine. .

Many companies were able to simply cease operations; others rushed to divest themselves of their interests in Russia by selling off shops, hotels and factories; while some had to cut their losses and leave.

“Companies are in a difficult position when they have a large amount of production in Russia,” says Pierre-GabrielsonProfessor of International Marketing at the University of Vaasa in Finland.

“You can’t suddenly stop production and if you leave the country, Russia has indicated that they will confiscate the company and the facilities there, so it’s really not easy to stop the operation,” he told Euronews.

But what about the big brands, among the best known in Europe, which continue their activities in Russia? Why didn’t they stop their operations?

The situation is not always black or white.

Professor Gabrielsson told Euronews there are “big risks” for companies that decide not to pull out of the Russian market or are seen as taking too long to make a decision.

“These well-known and recognized global brands have this problem that consumers make their own decisions. And if they don’t like what the brand is doing, they will stop buying, so there’s definitely a big risk with the brand,” he says.

Renault

This week, Ukrainian President Volodymyr Zelensky specifically challenged several French companies including Renault, which were still operating their Moscow plant, which remained open while other brands such as Volkswagen had already suspended their activities in Russia.

Earlier in March, Zelenskyy also called on food companies Nestle and Mondelez, consumer goods makers Unilever and Johnson & Johnson, European banks Raiffeisen and Societe Generale, electronics giants Samsung and LG, product maker BASF chemicals and pharmaceuticals Bayer and Sanofi, saying they and “dozens of other companies” had not left the Russian market at that time.

Some of those companies, like Samsung, have since suspended operations in Russia.

Zelenskyy’s public humiliation of the French car giant had an almost immediate effect as Renault announced it would stop manufacturing there and reconsider its stake in the AvtoVaz company which manufactures Lada cars.

And the reason for the delay? Renault employs two thousand people at its Moscow plant, while AvtoVaz has 45,000 employees – with the French company hinting that it should consider their interests and act “responsibly”.

Marks and Spencer

British retailer Marks and Spencer has come under fire from British politicians because its 48 stores in Russia are still open.

The company employs 1,200 people there, but the stores are actually licensed to a Turkish company which operates them under a franchise agreement – so even if M&S in the UK wanted to close the stores, they couldn’t. physically.

However, the company has already suspended shipments of M&S products to the Turkish franchisee in early March, so inventory will eventually dwindle on Russian store shelves. Meanwhile, to show support for Ukrainians, Marks and Spencer is increasing its support for UNHCR and UNICEF in response to the refugee crisis.

Mixed picture for fast food

Other Western brands operate in Russia as franchises face similar issues as Marks and Spencer, although this depends on the franchise agreement.

McDonalds, for example, has most of its outlets in Russia, employing 62,000 people in over 800 locations. Earlier this month the company announced it would temporarily close them all, but about 100 McDonalds restaurants in Russia are franchises, so they remain open.

Customers can still eat at some 800 Burger King restaurants across Russia as well, and that’s because those locations are operated as franchises in partnership with local Russian businesses, and their deal makes it impossible to walk away. short term, even if they want to – – and partners also refused to close.

Parent company RBI says it is trying to divest itself of Burger King in Russia, but it will take some time. In the meantime, they have ceased all support for Russian operations.

“Would we want to immediately suspend all Burger King operations in Russia? Yes. Are we in a position to impose a suspension of operations today? No,” RBI Chairman David Shear said in a statement.

The Subway sandwich chain finds itself in the same situation, since its 450 outlets are all franchised, so the parent company is unable to close them. However, in a statement, Subway says that all profits from Russia will be used for humanitarian aid to Ukrainian refugees.

Nestle and Mars

Nestlé is another brand that has been criticized for being slow to close operations in Russia.

This week, the Swiss multinational food and drink company announced that it would end most of its activities in Russia due to the invasion of Ukraine, but would continue to sell baby food and hospital nutrition products.

The company also has nearly 6,000 employees in Russia and told Euronews: “We are in the process of identifying solutions for our employees and our factories in Russia. We will continue to pay our people.

Other major European and American consumer goods companies say, like Nestlé, that they are cutting back to focus on the essentials, but have not left Russia altogether.

For example, confectionery and pet food company Mars, which has been in Russia for decades and has nearly 6,000 employees and several factories there, recently said it would suspend new investments in the countries as well as imports and exports to Russia, and would pause advertisements. and social media.

But Mars will continue to sell food and pet food, saying it has an “essential role in feeding Russian people and pets.” Profits from the Russian company will go to humanitarian causes.



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