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Thursday, February 29, 2024
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Starbucks will exit Russia market, closing 130 licensed cafes

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After 15 years operating in Russia, Starbucks will exit the market, joining companies like McDonald’sExxon Mobil and British American Tobacco in withdrawing from the country completely, according to CNBC.

The coffee giant announced Monday that it will no longer have a brand presence in Russia. Starbucks has 130 locations in the country, which account for less than 1% of the company’s annual revenue. They are all licensed locations, so the Seattle-based company itself doesn’t operate them.

The fast-food giant said the suspension of its sizable Russian and Ukrainian operations cost it $127 million in its first quarter. The two markets accounted for 9% of its revenue in 2021. The company had roughly 850 restaurants in Russia, most of which were operated by the company instead of licensees.

On Thursday, McDonald’s announced it would be selling those locations for an undisclosed sum to a Siberian franchisee, who will run them under a new brand.

Starbucks said it will pay its nearly 2,000 Russian workers for six months and help them transition to new opportunities outside of the coffee chain.

Both consumers and investors have pressured Western companies like Starbucks to cut ties with Russia to show opposition to the Kremlin’s war with Ukraine, but unwinding licensing deals takes time. Starbucks has suspended all business activity with the country since March 8. The pause included shipments of all Starbucks products and temporarily shuttering cafes.

In its latest quarterly results released in early May, the company did not disclose the financial impact of the suspension of business operations. Former CEO Kevin Johnson had pledged to donate royalties from the Russian business to humanitarian causes.

But it was surely a smaller financial blow than that dealt to McDonald’s, which has been in Russia for more than 30 years.

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