Doing business with Russia for international big brands is not always black or white

In the first month of Western sanctions against Russia, thousands of businesses ceased operations in the country either as a direct result or because the public, their customers, had little appetite to see them make money while Russian troops continued their invasion of Ukraine. .

Many companies could simply stop trading; others have been quick to divest themselves of their interests in Russia by selling shops, hotels and factories; while some have had to cut their losses and walk away.

“Companies are in a difficult position when they have a lot of production in Russia,” he says Peter GabrielssonProfessor in International Marketing 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 tells Euronews.

But what about the big name brands, some of the most renowned in Europe, which continue with the business in Russia? Why they have not stopped their operations?

The situation is not always black and white.

Professor Gabrielsson tells Euronews that there are “big risks” for companies that decide not to withdraw from the Russian market, or are seen as taking too long to make a decision.

“These big global brands have the problem that consumers make their own decisions. And if they don’t like what the brand does, they’ll stop buying, so there’s bound to be a lot of brand-related risk.” he says.

Renault

This week, Ukraine’s President Volodymyr Zelenskyy specifically called out a number of French companies, including Renault, that were still operating their plant in Moscow, which remained open while other brands such as Volkswagen had already suspended business in Russia.

In early March Zelenskyy also he called out food companies Nestle and Mondelez, manufacturers of consumer goods Unilever and Johnson & Johnson, European banks Raiffeisen and Societe General, giants Samsung and LG electronics, BASF chemical manufacturer and Bayer pharmaceuticals and Sanofi, saying they and “dozens of other companies” had not come to the Russian market at that point.

Some of these companies, such as Samsung, have since suspended its operations in Russia.

Zelenskyy public embarrassment of the French car giant had an almost immediate effect, Renault announced it would stop manufacturing there, and reconsider their participation in the company AvtoVAZ Lada automobile manufacturing.

And the reason for the delay? Renault employs 2,000 workers at its Moscow plant, while AvtoVaz has 45,000 employees, and the French company hinted that it had to consider its interests and act “responsibly”.

Marks and Spencer

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

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

However, the company already suspended shipments of M&S products to the Turkish franchise holder in early March, so stocks will eventually run low on Russian store shelves. Meanwhile, to show its support for the people in Ukraine, Marks and Spencer is increasing its support for UNHCR and UNICEF in response to the refugee crisis.

mixed picture for fast food restaurants.

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

McDonalds, for example, has most of its outlets in Russia, which employs 62,000 people in more than 800 locations. Earlier this month, the corporation He announced it would close them all down temporarily, but about 100 McDonald’s restaurants in Russia are franchises so they remain open.

Customers can still eat about 800 Burger King restaurants throughout Russia as well, and that’s because those locations are operated as franchises, in partnership with local companies Russia, and agreement makes it simply impossible to walk in the short term , although they want – – and partners also have refused to close.

Mother company RBI says he is trying to shed Burger King itself in Russia but this will take time. Meanwhile, they have stopped all support for Russian operations.

“Would we like to suspend all Burger King operations immediately in Russia? Yes. Can we enforce a suspension of operations today? No,” says RBI president David Shear. in a sentence.

The Subway sandwich chain is in the same situation, as its 450 outlets are all franchised, so the parent company can’t shut them down. However, in a meter statement says any benefit Russia It will be dedicated to humanitarian support for Ukrainian refugees.

Nestle and Mars

Nestle is another brand that was criticized for being slow in closing operations in Russia.

This week the multinational food and beverage company based in Switzerland announced would end most operations in Russia due to the invasion of Ukraine, but will continue to sell baby food and hospital nutrition.

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

Other big European and US consumer goods companies like Nestle say they are downsizing to focus on essentials, but they haven’t gotten out of Russia entirely.

For example, the company treats and pet food Mars, who has been in Russia for decades and has about 6,000 employees and several factories there, recently said it would suspend new investments in the country and imports and exports to Russia, and stop the ads. and social networks

But Mars will continue to sell pet food and food, saying it has an “essential role in feeding Russian people and domestic animals.” Proceeds from the Russia business will go to humanitarian causes.

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