Coke, McDonalds and Starbucks suspend business in Russia, as only a few holdouts remain

A flurry of companies left the Russian market on Tuesday, but many marquee names are still doing business as usual.

Nearly two weeks after Russian President Vladimir Putin started an unprovoked war in Ukraine, much of the Western corporate world has distanced itself from the country.

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Nearly two weeks after Russian President Vladimir Putin started an unprovoked war in Ukraine, much of the Western corporate world has distanced itself from the country.

ExxonMobil, Netflix, and Microsoft have suspended operations in Russia. FedEx halted all shipments. DirecTV and several other media companies cut broadcasts of Kremlin-sponsored television networks. 

Some companies that were criticized for still operating within Russia announced that they would be closing most of their operations on Tuesday. McDonald’s announced it was temporarily closing all operations in Russia, more than 800 restaurants, and Starbucks said it would suspend all business activity in Russia, including the shipment of its products. That’s the same day that Coca-Cola also announced that it would suspend all operations in Russia. 

Talk of boycotts of the companies that have been slow to leave Russia have gone viral over the past few days, with messages like #BoycottPepsi and #BoycottCocaCola consistently trending on Twitter since late last week. 

Days of silence

Just before Russia began its invasion of Ukraine on Feb. 24, Coca-Cola announced a series of contingency plans meant to help the company cope with a potential war, including stockpiling ingredients. Those plans did not mention how the company will protect its employees in Russia or Ukraine.  

Coca Cola HBC has 10 bottling plants in Russia, while Pepsi has two, according to Reuters. Russia accounts for roughly 4% of total revenue exposure for both beverage giants, according to Reuters.

Pepsi also said Tuesday that it was suspending the sale of Pepsi-Cola, 7 Up, and other brands in Russia, but continue to sell other products like milk and baby formula.

Pepsi and Coca-Cola did not immediately respond to Fortune’s request for comment. 

The process of shutting down  

One of the issues companies have faced over the last few weeks revolves around whether a location is owned by the company, or if it is owned and operated independently, aka a franchise.  

In Starbucks’ case, all 130 Russian locations “are wholly owned and operated by a licensed partner,” according to a memo from CEO Kevin Johnson. On Tuesday, the company said that all of their licensed partners agreed to immediately pause store operations, but that the company would continue to pay their Russian employees. 

The franchise issue has come up with other American companies that have remained operating  in Russia, including Yum! Brands, which owns Taco Bell, KFC and Pizza Hut, and Restaurant Brands International, which owns Domino’s Pizza and Burger King. 

On Tuesday, Yum! announced it was pausing development in the country and redirecting profits to humanitarian efforts in Ukraine. However, it did not say if it would pause its current operations.  

McDonald’s, on the other hand, owns around 84% of its hundreds of restaurants, while only a minority are franchises. When the company announced that it was suspending operations, it was able to do so with relative autonomy. The company did not comment on its franchises in its announcement on Tuesday, but did say that all operations in the country would be paused. The company also said that it would keep paying its employees in Russia. 

Russian exodus 

Yale University professor Jeffrey Sonnenfeld, who serves as the university’s senior associate dean of leadership programs, began compiling a list of companies that remain in Russia with “significant exposure” shortly after Russia first invaded Ukraine on Feb. 24. According to Sonnenfeld’s list, 280 companies have announced their withdrawal from the country since then.

As of March 8, 32 major companies that fit Sonnenfeld’s criteria remain in business in Russia. Along with Pepsi, this includes Mondelez International, Inc., and Deere & Company.

While the argument could be made that cutting ties with Russia causes more harm for ordinary Russians that had nothing to do with Putin’s decision to invade, Sonnenfeld told The Washington Post that Putin’s decision to start a war leaves companies with little choice. 

“This is a last-ditch effort. You’re helping those workers by not having [the West] dropping bombs and shooting them,” Sonnenfeld said in an interview with The Washington Post

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